We painted a pretty depressing picture in the last column ("Lessons from the 1980s: Working Capital, Part 1.") So how DID dealers survive the 1980s? They spun that working capital like crazy. Working capital (WC), as everyone knows, is defined as current assets minus current liabilities. Sales divided by WC is “working capital turn.” Modern economists state a high working capital turn means greater profit. The reality of the 80s was if one had a WC turn of over 6 in the farm equipment business, the bills could not be paid due to the high capital requirements. (Our WC turn approached the speed limit.) 

"Mr. Banker we have good news and bad news. The bad news is we can't make all our payments this year, but the good news is we are going to stick with your bank one more year!”

Current assets on the books were one thing; real asset value was another. Cash was the only value that was real. Accounts receivables were a guess, inventory on hand would more than likely be much less than booked, and cash on hand was sometimes a negative number!. Bankers soon found this out. Our banker was a saint; we are still with him after 43 years. (Here’s my favorite banker-dealer joke. "Mr. Banker we have good news and bad news. The bad news is we can't make all our payments this year, but the good news is we are going to stick with your bank one more year!”) 

Our bank president always had a neck issue (we were the pain in his neck) and the more stress he was in, the more his neck would draw to one side. Meeting with us usually resulted in his ear touching his shoulder. One needed a good banker. 

The dealership's current liabilities on the other hand were real – they brought collectors with power. Bills had to be paid. 

So, how did some dealers meet obligations? Many didn't. 

There was a dealer in southwest Arkansas who worked a plan. One Monday morning at the dealership, the doors were found to be locked. Customers arrived, many with trucks to pick up equipment, and mass confusion ensued. It seems the dealer had collected money for the equipment repaired, then sold that customer’s equipment to two or more others. He had sold most of his inventory at a "half price" parts and machinery sale and financed units to multiple “customers” again, to more than one buyer (this was before computers and today’s internet can remember). 

The manufacturers were called, as were the credit corporations and local authorities. We were told by a company rep it was like nothing seen before. Customers were arguing over whose implement was his, each possessing a bill of sale or paid work order. Tempers flared and the local sheriff earned his pay. It seems the dealer had fled the country with around $1 million in cash or non-touchable accounts. He had planned this for months. 

“We floor-planned everything that did not move or eat. We borrowed on everything except our firstborn. We applied and obtained SBA disaster loans. We even robbed Peter to pay Paul, as long as we knew payment for Peter was secure.”

Most dealers scratched by. We floor-planned everything that did not move or eat. We borrowed on everything except our firstborn. We applied and obtained SBA disaster loans. We even robbed Peter to pay Paul, as long as we knew payment for Peter was secure. Some called it “cash flow management” while the manufacturers call it “sold out of trust.”  Trust me, don't ever go there. 

So, this has been morbid, hasn't it? Alas, take heart. Nothing can be worse than the 1980s in ag because we have fewer dealers, better capitalized dealerships, more stable farmers and a constituency that is much more affluent – at least those who can buy what we sell anyway. 

Plus, we have a government that throws money out like it was just printed or something. Like your parents told you, "You think times could be bad, you ought to have lived back when we were kids!" 

Until next time wishing you smiles and prosperity … and a lighter topic. 

New Standing Blog Series in Rural Lifestyle Dealer

Told from the perspective of an in-the-trenches owner/operator — Tim Brannon of B&G Equipment, Paris, Tenn. —  Equipment Dealer Tips, Tales & Takeaways shares knowledge, experiences and tips/lessons with fellow rural equipment dealerships throughout North America. Covering all aspects required of an equipment dealership general manager, Brannon will inform, entertain and provide a teachable moment for current — and future — leaders within equipment dealerships.

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