The 2018 Dealership of the Year judging panel has been with the program since its beginnings. They’ve watched the evolution of the rural equipment market and its dealers — and have seen the financial metrics and practices behind the market’s leading dealers. Here are their recommendations for you to reach Dealership of the Year caliber.
Comments from David L. Kahler, retired CEO of Ohio-Michigan Equipment Dealers Assn., Dublin, Ohio:
I have served as a judge for the Dealership of the Year program since it first started in 2007. There are several items that stand out in my mind in terms of the evolution of rural lifestyle dealerships.
There are 3 major areas that are extremely important in the selection process: revenue per employee, return on assets (ROA) and absorption rate.
Over the years, we have seen a major improvement in revenue per employee numbers. This number is affected by all areas of the dealership and is a very good measuring stick for success. Revenue per employee grew from an average of $350,909 in 2013 to an average of $524,537 in 2018. That is a very strong increase of 49.5% in just 6 years. In the 2018 program, we had two dealers over the $600,000 threshold … that is strong.
David L. Kahler
When we look at ROA, it is interesting to note that there has not been hardly any changes over the years. Back in 2013, the ROA numbers were in the 7-9% range. In 2018, the range was from 7.6%-20%, but averaged around 10%. If a dealer can keep their ROA in the 8-10% range, they will do OK. Many times, the ROA can suffer slightly when a dealer gets a lot bigger and acquires more fixed assets, more employees and more rolling stock.
Absorption rate has only been judged for the last 3 years, but the 2018 numbers are strong. They ranged from around 60% to over 80%. If rural lifestyle dealers can maintain absorption rates in the 60-80 % range, they typically will have strong years. Those numbers mean that their profits in the parts and service departments will cover 60-80 % of all their expenses.
I believe the most important element for rural lifestyle dealers to be successful in the next 5 years is to strive to push your revenue per employee over $600,000. In 2018, we had two dealers over that amount and three more very, very close.
And finally, probably the most important element for a successful dealership is to have the whole employee team constantly remember to make your customers feel Important. This leads to viable relationships with customers, which leads to sales.
Comments from Charles R. Glass, President of Glass Management Group, Arlington, Texas:
I was fortunate to be one of the inaugural judges for the Dealership of the Year program. I previously was a member of the sales management team of two of the largest shortline manufacturers during my career. During my tenure, I had the opportunity to work with dealers of all the majors. I knew many dealers across North America and had visited in several of their dealerships over the years. Because of this personal knowledge of the candidates, I developed a spreadsheet that contained the categories (but the dealers were identified only by a number) which I used to make the final selections. That spreadsheet ultimately became the central tool used in the Dealership of the Year evaluation process.
I have also had the opportunity to witness the growth of the lifestyle farmers in our industry. Like many major events, this one came into view very gradually. As farm consolidation began to take place in the late 1970s, it became apparent that a new market was available. Dealers who sold these smaller horsepower tractors did not realize that they were servicing a changing customer base, but were simply meeting the needs they saw in their areas of responsibility.
Charles R. Glass
By the 1990s, it was a fully recognizable market and was being actively targeted by many companies and many dealers. Kubota Tractor came on the scene in the early 1970s and soon became the dominant name in this market, taking market share from Ford and Massey Ferguson.
Lifestyle farmers are not really farmers. They don't think like farmers and they don't buy like traditional farmers. Early on in the identification of this market, dealers began to offer "packages" of tractor and equipment that would be required to equip a new small farm. Suddenly, monthly payments were of prime importance and dealers developed marketing programs to meet the needs of these new buyers.
The key to success for today's lifestyle dealer is to watch those industries that are selling to the same group of buyers and tailor their marketing efforts to the desires of today's buyers. Many of these purchasers will research their needs online, read comments of others who have purchased the same equipment and then place their order online. The dealers who are on the leading edge of technology will be the one who are successful in 5 years.
Comments from Dr. W. David Downey, Executive Director, Center for Agricultural Business (CAB), Purdue University, West Lafayette, Ind.:
My most significant impression of the top rural lifestyle dealers is the dramatic increase in their sophistication. In the time I have served on the judging panel, I have seen these dealers grow into sophisticated businesses that apply more powerful management tools to monitor their finances and operations.
Dr. W. David Downey
Using tools such as sales per employee, adsorption rate and return on investment (and many others) to monitor their efficiency, the most successful RLDs have become stronger businesses. I have also seen evidence that top RLDs are doing a better job strategically planning their businesses and developing succession plans. They do all this while continuing to maintain a strong presence in their market by supporting a wide range of community activities.
Over the next 5 years, these same management tools will necessarily be integrated with more sophisticated data collection and analysis methods to guide their decisions. Fast paced and stiff competition make it imperative to increase the efficiency of their business. Shopping online will continue to be a real threat. To compete, ‘local’ rural lifestyle dealers will need to differentiate themselves by delivering personalized service in a friendly helpful atmosphere that electronic commerce has difficulty competing with.
What it Means to Be Named Dealership of the Year
“Being named Dealership of the Year elevates how you are perceived by your own employees. It solidifies that we truly are a dealership above the rest. When they are communicating with customers, they can say with authority that we are better than the dealership down the street,” says John Ewald, owner of Ewald Kubota, Seguin, Texas, and 2017 Dealership of the Year in the Multi-Store category.