The current ag economy is putting pressure on equipment dealers’ business. There are 6 factors, says Lloyd Farnsworth, director of sales with DIS, that have created a “perfect storm.” He says those include:
Too much inventory: Every OEM has solved supply chain issues and yet sales are down everywhere, therefore the dealers are pushed to hold more stock than they can sell.
Commodity prices are low: Customers can’t afford to replace their machines.
Interest rates are high: Both financing sales and paying floorplan costs are higher than anyone has seen for more than a decade.
Staff shortages are everywhere: Finding technicians or any other qualified dealership personnel is harder than ever.
Political uncertainty is everywhere: There is certainly a higher probability of a North American trade war, affecting every OEM in some fashion.
Technology disrupters are popping up everywhere: AI and other technology will impact every element of dealership daily operations.
“What can you do today to combat all of these things that are working against you?” asks Farnsworth. “Where can you find more efficiency, profitability in some small areas that will lead up to a big overall impact, positive impact for your business?”
Dealership consultant John Andersen adds, “We've seen downturns, we know the cyclical nature of the ag business and construction business. We understand election years and things like that. But this is pretty unique in the fact that we're getting touched from so many areas that I think the next 18 months could be more than just challenging. I think it could be a death blow to some people that are ignoring it right now. Put your head in the sand at your own peril, we know what happens.”
Farnsworth challenges dealers to look for the areas in the business you can influence with the challenges the industry is facing with equipment sales right now.
“The key to survival is understanding what part of your business is going to thrive and what part is going to survive,” Andersen says. “And if we take the assumption for what we're moving forward on here, Lloyd, if we go back to the earlier slides that talked about the perfect storm and commodity pricing and access to capital and interest rates and all those things that keep us from selling new equipment, a glut of on the market of used equipment, depreciated value of used equipment in the market space because of the economics.”
The two have identified 22 questions to ask and implement to improve operations and absorption rate.
Service Department
- Are you automatically rounding up each labor punch to gain extra minutes, which add up to at least 3 hours per tech per month?
- Do you have a system that promotes and tracks service maintenance plans?
- Are you inspecting every machine as it is repaired, to add more billable lines?
- Is there an incentive plan with real-time measurements so every technician has an opportunity to both earn more money for the dealership as well as their own paycheck?
- If unionized in your shop, have you presented the concept of a win/win bonus incentive plan?
- Are you tracking every part that goes into every repair line?
- If renting equipment, does your process ensure that every rental return damage/repair item is quickly and accurately priced back to the renter for reimbursement?
- Have you set up automated shop supplies billing lines? Environmental fees? Delivery fees?
Parts Department
- Are you automatically pricing increased margin into low-dollar parts? This ‘pricing matrix’ can increase parts gross profit by at least 1% per month.
- Have you recently evaluated and returned dead parts inventory to all of your major product lines?
- Are you tracking stock order percentages versus emergency orders? Can you improve your discounts received?
- Are you moving overstock / deadstock from one branch before ordering the same parts in a different location?
- Do you regularly cycle count your biggest / most expensive lines?
- Have you set up parts payment through texting?
- If renting equipment, have you set up parts sales for every possible consumable within a rental?
- Have you set up a parts department incentive plan?
- Are you accurately tracking and updating parts in your service trucks?
Sales Department
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Are you processing a thorough inspection for every piece of used equipment prior to providing a trade-in value?
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Have you set up incentives to move older inventory items?
Overhead Items
- Have you reviewed your DMS bill to match user licenses and add-on products to your current needs? What are the benefits / drawbacks of reducing licenses or software options?
- Have you looked at every operational contract for cost savings?
For more on each of these questions and to see some of the tools DIS offers to help manage dealership business operations, watch the webinar with Farnsworth and Andersen here.
The parts and service business is THE lifeblood of every farm equipment dealership. With new equipment unit sales expected to lag in 2025, the strength of a laser-focused parts and service business will never be more important to your operation. Recognizing this, Farm Equipment’s Advisory Boards have stressed the paramount need for a focused forum for ag machinery dealers to share and learn key strategies and tactics to optimize their aftermarket operations — and protect every fractional percent of margin that’ll be necessary to ride out the rough seas ahead for new wholegoods sales.
That’s why the 2025 Dealership Minds Summit in Iowa City, Iowa, will focus on the theme of “The Fully Absorbed Dealer,” equipping you with everything you need to know to maximize profitability and drive operational excellence in an uncertain market. Join the brightest dealership minds from across the U.S. and Canada this summer, July 29-30, for a 2-day dealer-only event that features collaborative learning through focused general session presentations, dealer-to-dealer panel presentations, informal and interactive roundtable discussions and networking.
