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Irrigation Complements Dealers’ Machinery Sales

Irrigation equipment affords dealers another opportunity for sales - and a way to get even closer to customers of all colors.

Mike Lessiter, Editor/Publisher

What's the difference between a dealer selling farm equipment and one selling irrigation equipment?

One prays for rain and one prays for drought.

Now, some dealers are finding good business by having a foot in both camps.

In some areas of the country, water is the farmer's most important variable. When the sun hits, cracks the soil and begins to wage war on the root system, irrigation is the only friend that farmer can call on.

The USDA reports that while just 16% of all harvested cropland in the U.S. is irrigated, this acreage generates nearly half the value of all crops sold. Obviously, irrigation is playing a huge role in the nation's yield production and agribusiness health.

Some dealers are finding that they can add this entirely different product line with existing facilities, vehicles and staff, and that it allows the trusted dealership to handle even more of their customers' equipment needs.

While irrigation is probably not a high-growth segment (in fact, proposed legislation could reduce the amount of irrigated land in some states), it also underserved in some areas.

Manufacturers tell Farm Equipment that they are open to growing their representation among farm equipment dealers and their built-in customer bases. In fact, changes in their current model of distribution (which includes some well-drillers, gated pipe retailers, pump distributors and farmer-dealers) may open up new opportunities for farm equipment dealers in the years ahead.

"Irrigation sets us apart from other dealerships because it makes us more of a one-stop dealership for all the customers' needs," says Ed Heim, of Kansas' Hoxie Implement. "It brings additional customers through the door who might be interested in some other piece of equipment."

Dealers Speak Out
Farm Equipment interviewed equipment dealers succeeding in irrigation equipment.

Ed Heim, Hoxie Implement, a three-store Case IH dealership in northwest Kansas. According to Heim, the company has sold center-pivot irrigation for 25 years and gated aluminum pipe and irrigation engines even before that. "We got into the center pivot business for three reasons: gated pipe was not selling well and center pivots were gaining popularity; the Reinke representative kept encouraging us; and the 1980s were slow in the farm machinery business and we saw an opportunity to sell a new product to keep us going."

Donny Strang, Farm-Rite, Shiloh, N.J. A two-store Case IH operation in a tremendously diversified ag market (including nursery and sod) Farm-Rite started in irrigation equipment 30 years ago with Bauer and subsequently added Valley and Netafim. "With the diversity of agriculture in New Jersey, we need to cover all the bases, so we sell center pivots and linears, hard-hose travelers and drip irrigation systems," he says.

Steve Hiller, Schenkelberg Implement, a four-store John Deere dealership in Iowa. Schenkelberg is completing its first year in selling T-L Irrigation equipment. "We got into irrigation to even things out in the business," he says. "Spring and fall used to be our busiest times, but with planter and combine inspections, we had more capacity in the spring and fall." Farmers' displeasure with the complacency of other specialized irrigation dealers presented an opportunity to serve their same customer but with a different product.

The Learning Curve
Each of the dealers say it's possible to get off the ground without hiring specialized staff. Hoxie Implement started with existing staff and hired additional help only after the business was established and growing. Farm-Rite followed a similar path, easing into the business by selling reel travelers at first. "We used existing staff for sales and support," he recalls. "But with the addition of center pivots, linears and drip irrigation lines, we hired specialized sales and support personnel. A tractor salesman can properly sell the irrigation reel or power unit, but we have two specialists on the more complex systems."

Schenkelberg Implement found it could get started by hiring temporary help during set-up times, but otherwise needed no additional manpower. "We hired two part-timers to help with set-ups and ended up keeping one."

As for the learning curve, Heim says it takes a few years to fully learn the center pivot business. "No two irrigation systems are alike - they all have different lengths, gallonage requirements, different terrains or obstacles, and different customer expectations," he says. "We received sales and service training from our manufacturer, but most of it was on-the-job and learning from other dealers and competitors."

After 1 year, Hiller's eyes were opened to the amount of technical detail that is put into every quote for an irrigation system. "It was a lot more than I imagined. T-L has helped us with the measuring and layout side, but it's still foreign," he says, joking that he wished he'd paid more attention in geometry class. He is enjoying the sales challenge and notes that you get better with each job quote.

In contrast to farm equipment, the lines between sales, parts and service departments are blurred when it comes to irrigation equipment, says Strang. "A salesman who sells a highly technical automated irrigation system may also be the person who programs and troubleshoots the system. We often see a center pivot salesman troubleshooting a system. A service technician may not only install and repair systems, but he may also work with a customer to lay out a field that will later be quoted by a salesman."

Strang says training is available from the Irrigation Assn. to help bring salesmen up to speed. "An irrigation salesman needs to be a little more technical and understand irrigation principles such as fluid hydraulics, agronomy, soil conditions."

Most Resources in Place
Dealers needn't add a lot of capital to handle irrigation, as the key structure is often already in place. In fact, when Schenkelberg Implement entered the market last year, they had the service trucks, techs and lift equipment for assembly. Some special tools were the only purchases needed, says Hiller.

"A well-run irrigation dealership needs service vehicles with parts, welders and at least one crane-boom truck to do structural work," says Heim. "Some dealerships only have a couple of irrigation service employees and then contract out the assembly. But if you have a large market, having enough people on staff to assemble systems or make structural repairs makes things go smoother."

Because Farm Rite does all of the work in-house, Strang needs more people and equipment, which he says includes drafting equipment, trench-ers, backhoes and lift equipment.

Heim says wholegoods inventory is minimal as most systems are not ordered until sold.

Meanwhile, parts inventories must include all main working components because the customer can't afford to wait during the season. Strang agrees, but says that stocking irrigation parts and supplies is somewhat risky. "If it's a wet year, you may carry your inventory for another 12 months or longer."

On-Call Service
Irrigation not only requires a paradigm shift by the salesforce, but the service techs as well. The demands by customers are not so different (though when the farmer says he needs water now, you know when he's telling the truth), but the work environment is.

"Customers need the systems repaired the same day they break down when the crop is growing and it is 100 degrees outside," says Heim. "The work is 7 days a week during the season. This takes a special group of technicians who don't mind working in adverse conditions."

Schenkelberg Implement survived its first irrigation season with few problems, even before most of his techs got to service school. "With the system we carry, we're on the phone more than on the farm, since there's not a lot of electronics. It's generally either a leak or a pivot got stuck." He did hear a little bit about techs not overly excited about battling cornstalks in the summer heat, however. Hiller says that selling the mechanics on irrigation was the most important sales job he did last year.

For the most part, Farm-Rite employs dedicated service techs for irrigation equipment. "The tractor mechanic can work on the power unit and basic pump diagnostics as these are within the realm of the mechanic," says Strang. "A few work on center-pivot work, but because they involve a lot of electrical expertise, we keep it separate."

Sales Process Differences
There are big differences when it comes to selling an irrigation system.

"Dealers know they can sell a $100,000 tractor in 10 minutes," says Strang, explaining the difference. "A customer can come in looking at 150-horsepower tractor, and all you need to do is ask about tire size and number of remotes and bam, it's done.

"Here, on the irrigation side, you need to survey the field, discuss crops, go over flow, friction and absorption rates and design it on the manufacturer's web site. Each one has a drafting drawing. Out here where every field is different - our fields are very small and odd-shaped - each job is different."

Heim agrees that the sales load is a world away from, say, the simplicity of selling a tractor. "If you sell a new irrigation system, you first measure the field, then figure the correct system for the application, order the system, schedule delivery, line up transportation, pour a concrete pad, line up your setup crew, arrange for underground pipe and wire, complete the connections and test run. This is done in the field - not at the dealership."

After one year, Hiller admitted that the sales process took some getting used to. "It's not like spec-ing out a tractor that you can sell to 40 different customers. Every pivot is customized for that farm.

"What I like is that the margin holds up on irrigation," he says. "They don't leave your place and go get three bids from your in-line competition."

The quoting and sales process is lengthier, so the dealer must be prepared to spend more time per quote and sale, says Strang. "This is especially true of drip system layouts and some center pivot and linear systems, as a plan normally must be drafted for the installation crew or submitted to the government for cost share." Fortunately, he says today's farmer is bright enough to do the design work prior to the season and not make emergency in-season decisions.

Opening New Doors
All of the dealers agreed that irrigation equipment leads to other sales opportunities. Even Schenkelberg Implement, which has less than 1 year under its belt, has seen benefits.

"Because of the time to go through the process with the farmer, we really solidified some relationships, which I'm certain will lead to future purchases," says Hiller.

"Properly installed irrigation systems leave a good impression, which gives customers more confidence in the dealership," says Heim. "We've converted competitive farm equipment customers to our brand because they had a good experience with an irrigation system we sold them."

While Farm-Rite is typically seen as a Case IH dealership, says Strang. "Our irrigation division often works with customers who bleed green or blue, exposing us to a larger customer base than we would see with just big red equipment. It affords us the opportunity to develop a relationship with competitive customers which sometimes leads to a conversion to our Case IH products."

The Results are There
Beyond the fact that it brings new customers in the door, each of the dealers say irrigation is a good, sustainable business for them.

Hoxie Implement has sold about 50 new irrigation systems in the past 2 years, many to replace storm-damaged machines last spring. "Our irrigation business has about the same profitability in wholegoods as our farm equipment," says Heim. "Irrigation parts margins are very good - better than our farm equipment parts margins."

Farm-Rite can sell about 20 reel travelers and 20 pivots in a good year, which together brings about $2 million. About 50% of the firm's total revenue in irrigation also comes in parts - things like drip tape, tubing, sprinklers and other things bought in large quantities by large growers. It's not uncommon to make $25,000 sale for drip tape, he says. On a company-wide basis, irrigation is responsible for roughly one-third of the dealership's sales margins, which also includes retailing farm and construction equipment, custom fertilizer application and hauling sales.

Hiller agrees that the profitability and margins are better than on farm machinery, and that the sales are not as competitive brand-to-brand. While he was too bullish for his sales forecast in the first year, he was still pleased with the first year's half-dozen sales. "As we get more out there, the word will spread and we'll continue to grow," he says.

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