Question: I am very fascinated by your presentation, but I am quite confused. Are you saying that you show no profit in new sales? Is that what is going on here? Also, if you do not mind my asking, what are you using for a starting point for that salesman? What is he using for a list price or a price that he is showing the customer? Lastly, are you publishing that or no?
Answer: Yeah, there is no margin on the new piece at all. If you pull my financial statement, you will see it shows 0% on all new pieces sold. We meet collectively as a team every week and we add the trades that we have brought on the books. We have the book value, but we have what we call the ‘minimum sales price.’ We say everyone collectively agrees, we are not going to sell this for a price below $20,000 or even $80,000. You cannot go below that as a salesperson. Otherwise, people would just give stuff away and we would lose margin on the backend, so they have to sell for that minimum acceptable sales price. And no, I do not publish it. We might have something on an online presence that shows our retail price. But every salesperson knows the minimum amount you can take.
Question: I am wondering how your salespeople are paid. Are they paid on the draw, or do they have to wait for all four trades or deals?
Answer: No, they do not have to wait, I simply ask them, “What do you guys want for the draw?” They have been there for a while and never abuse me. I tell them, “Guys, tell me what you need, and do not make me cut your draws the week before Christmas.” If we need to change the draw, I will change it in October. I say to them, “Tell me what you need, and we will give you a draw throughout the year.” Sometimes those are very complicated to follow, though. There are more extremes than one deal at a time.
Question: I was curious if you have found that this causes your salespeople to work together better? Is it causing any kind of consternation or confusion?
Answer: There is a little bit of both. Sometimes, the salesperson may be unclear on where they are going to go with that trade, so then they want to work together and say, “can some of you guys help me get rid of this?” On the other hand, there are scenarios where there is this trade that they do not want to take in, so they hurry and find someone to buy it. But then sometimes, not everyone knew about the last trade.
Question: Are you seeing an increase or decrease in the amount of time that your used equipment is on the lot? I mean, is it encouraging them to roll through that faster?
Answer: Our turn rates doubled when we went to this.
Other Related Content:
- Valley Implement’s Sales Program Checklist https://www.farm-equipment.com/articles/17538-valley-implements-sales-program-checklist
- Compensation Plans: A Tale of Two Dealerships https://www.farm-equipment.com/articles/17540-compensation-plans-a-tale-of-two-dealerships
- Negative Margin: Example & Explanation https://www.farm-equipment.com/articles/17539-negative-margin-example-explanation