I try to attend as many industry conferences as I can each year. They are great places to network, talk best practices, listen to industry speakers and catch up with old friends. Regardless of the conference theme, there’s always one topic top of mind: “What are you doing with used equipment?” In April 2018 I wrote a column entitled “There’s No Easy Button for Used Equipment Valuations,” and although I still subscribe to this, the washout cycle is the next best thing.

At the 2019 Western Equipment Dealers Assn. North American Dealer Conference, I was invited to be on a panel to discuss used equipment with Jordan Kite of Agri-Service and Shawn Skaggs of Livingston Machinery. I have gotten to know and learn from them over the past few years. The point of the panel was to talk about what do with used equipment culturally, procedurally and through marketing. All three aspects are essential to the success of any dealership’s used equipment inventory.

On the panel, I discussed the washout cycle and the importance of understanding the number of new machines sold and how long it takes to sell through each turn of the washout cycle. Understanding the amount of time each turn takes is a critical stat when looking at what the future holds. The reason I like the washout cycle so much is that it does tell the future. The better I can understand what we have and what is coming, the better I can decide what direction to go.

The washout cycle is as close to having a crystal ball as a used equipment manager can get. It tells me all I need to know about the health of current inventory and the health of future stockpiles. What is great about this is your ability to plan your next move. These are questions I like to ask myself:

“How many units do I need to sell?”

“How many units can we sell in a given period?”

“What is the mix of the machines in the given period?”

“What do I need to do to get the mix we need to be successful?”

“How am I going to use retail, wholesale and auction avenues to be successful?”

When I know the answers to these questions, I start building a plan:

“What programs are needed?”

“How long will these programs need to run to be effective?”

“What are the costs to run the programs?”

“Are the programs regional or are the company wide?”

Measuring the program’s effectiveness is essential. In the first 15 days, I like to see what the level of activity is. These are new programs, and the sales reps have something new to take to the customer. This measure is typically a good indicator of if the program is going to be successful.

Earlier this year, we ran a program on one-year-old combines. We had 10 machines to move and had some dollars to throw at them. The pricing was significantly lower in price than anything listed anywhere else. We sold 2 in 90 days. I used my 15-day rule, and by all measures, it was a hit! Sales reps were logging good customer activity and getting machines out to demo. The only thing, no one was closing any deals. I am not going to say this was a failure, but I think a low price shouldn’t have been the only thing marketed. Payments and interest rates should have been a focus as well. In these economic conditions, creativity will go further than six digits and a dollar sign!

Next, I am going to look at how wholesale and auction will play into the mix. When the mention of “Auction” and “Wholesale,” the rush to judgment goes to one place, loss. Yes, I take stuff to auction and yes, I sell things at wholesale but, it is a speck of the business conducted compared to buying and selling wholesale and auction equipment. I have found this to be a great way to fill holes in my inventory, and more importantly, they make a good margin.

Last but not least, I can’t say how important it is to have your marketing people involved in the process. I task our marketing department with email, text message and direct mail campaigns. I work with marketing staff members to make the website information is up-to-date with current programs and to source EDA data that best fit the equipment in the program.

Without understanding your washout cycle and understanding the effect it will have on your current inventory, it is hard to be proactive and focus on equipment that is either a current issue or will be a future problem. The better you can see the “future,” the better you can manage your inventory and anticipate your next move. The washout cycle is not an “Easy Button,” and it not a silver bullet, but it’s the next best thing!

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