Closely Managing Margins & Costs

By: George Russell, Executive Partner with Currie Management Consultants

Without a major tractor line, the independent dealer often sells products with lower average prices. As a result, he must depend on selling higher unit volumes of less costly product, or he must maximize the margin on each sale. So, in addition to a concentrated customer focus, these dealers must also focus on closely managing their costs.

Independent dealers must also be specialists that offer a deeper product selection with excellent application knowledge, as well as a generalist who sells a wide variety of products. The core elements of success are:

1. The ambition to invest time and resource to become a specialist
2. Sound management of margins and costs
3. Product availability and knowledge

I believe there will be slightly fewer farm equipment dealers over the next few years. However, the innovation of products and businesses in farm equipment continues unabated. To move these innovations into the marketplace will require dealers who have the drive to thoroughly understand their benefits.

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Get Your Expenses In Order

By: John Schmeiser, CEO of Western Equipment Dealers Association

The most difficult challenge a dealer faces when dropping a mainline and going only with shortlines is getting his expenses under control and making sure he has the right level of staffing. Theoretically, dropping a mainline should result in a decline of total sales. Getting the proper number of employees to address the reduced sales level and reducing expenses proportionally can be a difficult task.

Success in Shortline Machinery is a new regular feature in E-Watch, our bi-weekly e-newsletter. It is brought to you by Versatile.

Versatile, celebrating 50 years of 4WD production, is a full-line equipment manufacturer known for building products that are simple, reliable and easy to service and maintain. Versatile is seeking independent-minded dealers capable of selling and servicing equipment for large scale farming operations. If you want to add more horsepower to your bottom line, contact Alan Graff at agraff@versatile-ag.com or (920) 819-9039.

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But a reduction in gross sales should not mean an automatic reduction in gross margin. Perhaps, it should provide an opportunity for increased gross margin.

The core values needed by dealers who are transitioning from handling full-line brand to speciality equipment include:

• Focusing on product that have a good reputation in the marketplace
• Focusing on products that don't have a lot of inline competition in your trade industry
• Establishing relationships with suppliers that have a solid structure that includes marketing support, opportunity for good margins, strong warranty reimbursement policies and service training programs for your techs

I expect to see more shortline-only locations as increasing demands from the mainlines encourage dealers to reduce their overhead and focus on speciality products where they can make a significant profit. There is growing pressure from the full-line manufacturers on their dealers to focus only on their products. To get a better foothold in their distribution channels, shortline manufacturers will need to treat their dealers better than the mainliners do. This will encourage dealers to make the shortline his mainline.

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Offer Customers More Value Than the Big Brand Dealers

By: George Keen, Senior Consultant with Currie Management Consultants

If you're going to succeed as an independent supplier of speciality products to customers who purchase their main farm equipment from another dealer, you must know those customers far more thoroughly than do your competitors. Otherwise, why would they come to you? It's because you bring more value to their purchase than the mainline dealers by knowing their needs.

You must show the customer why your products and your knowledge help them more than the equipment they could but from other dealers.

Success as a specialty equipment dealer comes down to:

1. Marketing and customer relationships
2. Effective financial controls
3. Great employees

Of course, you can never fault strong leadership!

As the consolidation of the major lines continues, it may leave some independent dealers, but what serves customers best will really drive the change in dealerships. If independent dealers offer value to the farmers, then they will survive and grow. If not, the will be replaced.

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Success in Shortline Machinery is a new regular feature in E-Watch, our bi-weekly e-newsletter. It is brought to you by Versatile.

Versatile, celebrating 50 years of 4WD production, is a full-line equipment manufacturer known for building products that are simple, reliable and easy to service and maintain. Versatile is seeking independent-minded dealers capable of selling and servicing equipment for large scale farming operations. If you want to add more horsepower to your bottom line, contact Alan Graff at agraff@versatile-ag.com or (920) 819-9039.

Originally published in 2010