Some dealers occasionally use auctions as part of their methods for selling used equipment. At the 2020 Dealership Minds Summit, three experienced professionals shared their experiences running their own used equipment auctions:
Bryant Roberson, used equipment manager, Quality Equipment, Winterville, N.C., spent 15 years in the auction business prior to joining Quality Equipment., a 27-store John Deere dealership group with locations in North Carolina and Virginia.
Eric Johnson and Leo Johnson, owners, Johnson Tractor, Janesville, Wis., have been hosting their own dealer-run auctions for more than 30 years. Johnson Tractor is a Case IH dealership with 4 stores in southern Wisconsin and Northern Illinois.
Here are 7 tips they offer for running a smart, efficient dealer-level auction of used equipment.
1. Do Your Research
Leo Johnson says that some auctions can be termed a “hit-or-miss” type of sale, whereas some dealerships choose to host an auction annually. The Johnsons have been hosting their annual auction for many years, some years even hosting 2 auctions when they had more equipment than they thought they could retail.
“You’ve seen some dealers who have had dealer auctions as kind of a one-time thing, and then they decide they’re never going to have an auction again because it was a failure. Why is that? It’s all in preparation, expectations and managing the thing…” – Leo Johnson, co-owner, Johnson Tractor, Janesville, Wis.
“We’ve seen some dealers that have had dealer auctions as kind of a one-time thing, and then they decide they’re never going to have an auction again because it was a failure,” he says. “There’s probably more misses than hits. Why is that? It’s all in preparation, expectations and managing the event.”
Roberson says that dealers should remember that during an auction, what is really up for sale is not just the piece of equipment on the auction block, but the dealership’s reputation. So, which auction company you work with really matters.
“When you start researching what you want to do, not every company is fit or suited to do a farm equipment auction,” he says. “If you’re planning to do a sale, spend some time with some auction companies, look at what they’re doing. Look at what works or not for a given case. Talk to farm equipment dealers who have done sales in the past.”
When going to a farm equipment auction, Roberson suggests looking for a friendly environment, but also recording data of what’s happening in the local area.
“Learn more about the auctioneer from that auction company. When you get ready to do a sale, you need to understand what you’re looking for and need,” Roberson adds.
Dealerships must evaluate the value an auction company brings to the table, and not be afraid to interview the auction company and ask for information.
“Ask where they’re going to advertise, where they’re targeting. If they say, ‘we’re not too sure,’ then you should not be too sure about that auction company,” Roberson says. “They need to have a plan. They should be able to tell you how many people are on their mailing list, if they deal with proxy bids, etc.”
2. Set Expectations with Your Auctioneer
Roberson says in most cases, he does not recommend having a completely online auction.
“Preferably, I like seeing a sale that’s a combination of a live simulcast auction with some online, because a good ring man can add 15-20% to a sale,” Roberson says. “If the auctioneer knows that you have an expectation of where you want to be, he has a direction in which to take that sale.”
A good auctioneer will be able to evaluate your inventory and estimate what each piece of equipment will bring, according to Roberson. You should be prepared to discuss with the auctioneer about how much you’re willing to accept for each piece of equipment.
“When you’re lining up a sale, one thing that helps is to put some items out there at the very first of the sale that you know are going to be disappointments — that will help the sale proceed forward,” Roberson says. “Let the customer see, these items are bringing cheap prices. Sometimes that backfires, but for the most part, they’re not bringing what the dealer had them advertised for.”
This tactic makes a customer more willing to step up and bid on items — because as the dealer, you’re selling the belief that that piece of equipment is going home with the customer.
“A good auctioneer is worth his weight in gold,” adds Eric.
3. Sell a Mix of Inventory
You don’t want to have too many of the same type of equipment in the same sale, Roberson says.
“You want individuality. You want uniqueness. You want a good overall spread. You want to have some tractors, some cotton pickers in the South, tillage equipment, planting equipment. You want something there for everybody,” Roberson says.
Determining which pieces of equipment should be part of the auction can be done by dates, say the Johnsons.
“If it’s been in inventory for 6 months, or certainly if a year has come, then it’s on the auction. It just has to get sold,” Eric says. “Part of our overall business philosophy is trying to keep our inventory fresh.”
“Ask where they’re going to advertise, where they’re targeting. If they say, we’re not too sure, then you should not be too sure about that auction company. They need to have a plan. They should be able to tell you how many people are on their mailing list, if they deal with proxy bids, etc…” – Bryant Roberson, Used Equipment Manager, Quality Equipment, Winterville, N.C.
The Johnsons recommend having between 150-200 pieces of farm equipment in an auction. “We’ve got to have a critical mass. Just to get a good crowd. Mix some low end items, medium range items and a few high end pieces,” says Leo. “Sometimes we get lucky and sometimes we take a hit.”
Having the same lineup during every annual auction is a tactic that has worked well for the Johnsons.
“We’ll sell some small stuff early, then we’ll sell our lawnmowers and our construction equipment, and they’re different groups of buyers, for the most part,” says Leo. “There’s some crossover, but we can see when the lawnmowers are done, there’s a bunch of people who leave.”
When the big equipment is selling, the Johnsons recommend having a variety in the order of when pieces sell.
“Go for the piece that everybody is interested in and get that one done first, to get a little momentum,” says Eric. “We tried that once, and we lost $10,000 on it. But the next three or four went beyond expectations.”
The Johnsons recommend not selling the same type of equipment one after another — or at least, don’t expect the last one to sell as well as the first one.
“We have done that before, where we had 4-5 combines in a row,” says Eric. “Leo is religious at taking notes and keeping tally of our costs on each item. Part of the preparation is managing your expectations of the reality compared to the projection.”
4. Get Your Sales Team Onboard
“I’ve sold for red dealers. I’ve sold for green dealers. I’ve sold for yellow dealers and blue dealers,” Roberson says. “The one mistake I’ve seen the most is not telling the sales staff what you’re preparing to do.”
Roberson adds that the key is to have the salesforce prepared so when salespeople are questioned by customers on the ground on sale day, the sales team is ready to support you.
“You want the salesperson to be sold on the idea so they convey to the customer that yes, we’re going to sell it — it’s a good tractor,” Roberson says. “It’s just been on the yard too long. We want to move on. You have to be prepared to sell that idea.”
Roberson cites an example of a sale at a Case IH dealership. There was a sprayer that he estimated would bring about $35,000. A salesperson was standing next to a customer who was prepared to bid on the sprayer. The salesperson told the customer that he’d sell the sprayer to the customer the following week.
“The dealer principal took care of the issue, but the damage had already been done at that time,” Roberson says. “That customer didn’t buy that sprayer. The whole time he was convinced and had been told by a reliable source who worked for the company, that he was not going to lose the chance of buying that sprayer. Eventually, we did sell that customer a sprayer, but that didn’t help the customer we were working for at the time, which was the dealer.”
5. Carefully Cultivate Your Dealership’s Reputation
A farm equipment sale is actually selling three things, according to Roberson: the dealership reputation, the customer’s reputation and the auction company’s reputation.
“If you did one sale and sold half the equipment and it went back to the yard and the customer saw that, you’re not going to have the same crowd at the next sale,” Roberson says. “You need to do it right the first time and take all the right steps.”
“If it’s been in inventory for 6 months, or certainly if a year has come, then it’s on the auction. It just has to get sold. Part of our overall business philosophy is trying to keep our inventory fresh…” – Eric Johnson, co-owner, Johnson Tractor, Janesville, Wis.
One example of a very successful tactic around a farm equipment auction Roberson saw was at a John Deere dealership.
“The CEO wrote in a brochure about why they were having the sale, and it impressed a lot of people,” Roberson says. “A lot of people commented that they’d never seen that before — where you had a CEO who people trusted who believed in the sale so much that he put it in writing. Things like that help.”
6. Make It an Event
Holding a farm equipment auction on the dealership lot is one thing Roberson really likes doing.
“You have the ability to do a multitude of things,” he says. “Make it an event. You’re already bringing the BBQ truck, the auction business. It’s like a circus. Invite people into your dealership. Have your sales staff there to talk to customers about the latest and greatest of what your brand has to offer or what may be in the yard.”
Roberson suggests that dealers invite upper level brand representatives to the event, and perhaps even representatives from local banks or Farm Credit Services to attend.
An auction not only helps move some equipment, but Roberson encourages dealers to welcome the auction crowd because it’s a lot of good advertisement.
“A lot of times, one thing you’re going to have is people who are strictly used buyers that don’t come into the dealership on a day-to-day basis,” Roberson says. “They buy the parts online and you don’t get that relationship with those customers. To me, it’s a win-win when you can put a customer on the yard.”
Roberson calls a farm equipment auction a neutral environment where salespeople can build relationships.
“Who knows who you may have come in two weeks later and buy something?” he asks.
7. Keep Perspective
Not every tractor is going to be sold to a farmer or construction owner, Roberson reminds dealers.
“You’ll have everybody at an auction from an antique buyer to a construction buyer to a forestry buyer to a farm equipment buyer,” he says. “You want a broad audience that brings uniqueness to your sale. You want a customer to see diversity when it comes to a sale.”
“The lawnmower auction buyers are as important as anyone else,” Eric adds.
Roberson says it’s important for dealerships to keep perspective on sale day.
“Are you above or below the market? How long have you had the units? It’s really a balancing act when it comes to all of those figures and the expectations are too high when you’ve had those units for 365 or 500 days,” he says.
Leo adds, “Sometimes we make a little money. It’s a matter of how close we come to the breakeven of our book value. We may be off on individual pieces on what they bring, but at the end of the day, our total sale proceeds are very close to what our projections were.”
Eric agrees. “To us, a successful auction is if we get 85% of our investment back, or 90 or 95. Remember the big picture.”