David Parker, consultant and executive vice president of FLM+, lists the following as the top 11 best practices dealers need to follow to be successful in ag equipment’s competitive marketplace. He says the best operations have a business strategy around people, operational efficiency and asset utilization.
1. Complete an annual plan
This doesn’t mean you have to hold a strategic planning meeting every year, but you should revisit it at minimum on an annual basis to address whether the marketplace has shifted or changed. If the market has changed, what do you need to do to respond to it?
2. Align all your business functions with your business model
If your business model is to be a high service, high value dealership, you need to have the people who can pull that off, Parker says.
3. Have a succession plan
Who is going to take over the dealership, or do you have a plan to move the dealership? “Either way it’s a plan rather than just having it happen. I know this is not a fun subject to talk about. I know this as a private business owner myself. However, it is real. Do you have a succession plan? The most successful retailers do. Think about it from a customer perspective. They’d probably like to know. They don’t need to know the details, but that a Versatile dealer not only will still be there, but is going to get stronger as I get bigger and stronger in my market,” he says.
4. Have processes for personnel and talent management
“If there is somebody who you think you need to bring your dealership value, you better find a way to lock him up. If not immediately, certainly over a short period of time because we aren’t minting a lot of new folks. The estimates are each of the next 5 years we will have 38,000 ag school graduates, but we’re going to need about 51,000 people with the kind of capability we need. Chances are you may be hiring a non-aggie. And that’s OK. Train them and get who really understand customers, how to take care of them, make them happy and keep them happy. You can teach them how a tractor works,” Parker says.
He adds that the best retailers have a strategy that states they believe in talent management processes and approaches, and they have discipline in talent management. Employees have to meet performance goals, and if they don’t, you part ways. “You need to have a senior manager, hopefully more than one, but certainly one who’s just passionate about personnel performance. They absolutely believe that that’s what drives business success,” he says.
5. Hire and retain from top to bottom
Parker says one of the biggest mistakes dealers make is thinking that because a job isn’t a big deal they can just hire anybody. “Understand, your customer knows when you’ve made that your strategy. If you believe that you’re hiring someone who’s not a family member who’s going to be there for more than 3 years, you are being optimistic. Now I hope they stay a heck of a lot longer than that, but why would they?” he says.
You need to put the effort into retaining them because, Parker says, statistically people stay in a job an average of 3.5 years. You need to have an individual development plan. According to Parker, over 60% of the reason employees say they leave a job is because there was a better career development opportunity at another business.
6. Have a compensation plan that’s consistent with your business model
Pay your salespeople on gross margin dollars. Most salespeople are likely making a high percentage of their potential income on variable costs, Parker says. “The best dealers do not cap it. The best dealers have salespeople making more than the president of the dealership.”
7. Operational efficiency
You have to stay focused on what’s going on in the business and where you are making money and where you aren’t, Parker says. You have to understand the impact on working capital as well as the impact on your ability to take care and service customers.
8. Identify your specific salespeople and protect their time
Stop giving your salespeople other responsibilities. You need to give them time to be out there selling. “They need to spend more time at the farmgate. Remember fewer customers or control in fewer hands means more competition not less,” Parker says. “How often do we need to see him, how often do we need to contact him, how often do you need to touch him?”
9. Reward salespeople on profitability not volume
Parker suggests taking this a step further and rewarding all employees this way. “Why can’t our parts guys get involved because of something or some information they brought us because of someone coming in for some parts. How can our service manager get involved because of something that he talked about with a customer back in the service yard. It’s everybody’s job at a dealership to sell stuff profitably, everybody’s job,” he says.
10. Utilize a customer information system
“Some of you have CRM tools, others maybe not directly, but do we really have enough information to understand who are those producers who are really going to the dance in the year 2025 and beyond. That becomes the real question,” Parker says.
11. Execute an aggressive sales and marketing strategy
You need a sales goal. “How on earth do you understand what good looks like if you don’t know where you’re trying to get to. How do you manage that?” Parker says. The volatility of the marketplace cannot be an excuse for not having a sales goal. Goals can be changed and modified, Parker says, but if you don’t know what success looks like, you won’t know when you get there. “Hope is not a strategy,” he adds.