Fortunately, or unfortunately, I have been through 5 major economic downturns that have been more severe than the current one we face. Each one fraught with dangers and opportunities but in the end, they all passed away and a majority of folks survived.

Indeed, many dealers actually expanded and grew their dealerships during these times because they realized that cash was king and paid close attention to their ability to absorb expenses. This, in-turn, allowed them to grow their capital and take advantage of better value growth opportunities.

Although these current times will also pass, I recommend you actively pursue growing absorption of your parts and service departments and lowering interest expense by using the declining values of used equipment as a marketing tool. Please remember, your customers have the same issues as you. Providing them a better value as you face these challenges will lead into a brighter future, while gaining greater customer loyalty and customer satisfaction.

To gain immediate impact on absorption, consider these 3 actions:

1. Change your processes to make the parts and service departments teammates, instead of

cooperating departments. Of the over 2,500 parts and service managers with whom I’ve interfaced, 85% of them tell me that 1-2 hours per day per tech is wasted in the movement of parts between the service center and the parts department. When I've been involved in helping dealers improve their processes in this area, the following results occurred:

• Reclaimed an average of 450 hours of billable tech time, per tech, per year and reselling it to different customers.
• Lowered customer invoices by $300-$400 for every 8 hours of work order.
• Increased parts sales through the service department by 20%.
• Increased parts ordering discounts.
• Setting customer expectations, decreasing complaints and improving their satisfaction; and
• Because of the improvement of productivity, every shop with at least 5 techs got the equivalent of a free (additional) tech.

2. From a parts perspective, dealers can generate additional cash by:

• Returning any part that has not had a hit in 18 months or that is surplus (more parts in that number than you need). Don’t let OEM restocking fees get in the way because you will quickly reclaim those fees by the better use of cash in faster moving parts or in other portions of the business.
• Making sure your wholegoods team is keeping tabs and recording customer fleets, so that the parts department can develop prospects and sales strategies for non-returnable obsolete parts.
• Being willing to free up as much cash as possible through internet marketing and/or parts resellers of obsolete, non-returnable parts that haven’t sold in 24 months.

3. Be aggressive in dealing with used trades. Time does not improve the value of trades in a declining market, so be quick to move and don’t hesitant to get rid of machines that fall short of profit expectations. Before finalizing any deal, make 1 of 4 decisions: 

1. Go straight to auction or wholesale.
2. Try to resell, “as is” for 90 days and then go to auction or wholesale.
3. Recondition and sell as a premium/certified trade.
4. Consign the trade with a minimum value your customer will consider if it can’t be sold at his/her price.

Presell the used knowing your market, spending more time looking for the used buyer, and reversing your sales process by selling the used first and then finalizing the new sale with the owner of the used piece that you need. Finally, if you are going to take a haircut on a piece of used, do it with a barber you like!

Unfortunately, everyone is going to get caught with a used piece that will lose money. Too many times, we give that money away, after a long procrastination, to some wholesaler or auction company that doesn’t have our best interest in mind. 

Instead, use the loss as a marketing tool. Find a used buyer who you do business with and offer the equipment, with that large loss to them. This will be helpful in several ways. First, it gives the opportunity to get the parts and service business from the machine. Second, it helps create value and loyalty from a current and potential future, used buyer. It also helps avoid auction fees. Lastly, it recognizes the need to move fast, lowering interest cost, and improving absorption of the parts and service departments.

John Maxwell once said, “Your altitude is determined by your attitude” Yes, given these challenging economic times, “this too shall pass.” But don’t wait it out. Your altitude (successes) will be determined by your attitude. Embrace it by improving your processes, customer value and competitive strength.