Vincennes Tractor Inc.
Locations: 1 (Vincennes, Ind.)
Major Line: John Deere
Shortlines: Krause, Unverferth, Brillion
Employees: 31 (28 full time, 3 part time)
2007 Sales: $25.8 million ($21.4 in wholegoods, $3.3 in parts, $1.1 in service)
2007 Return on Assets: 64.79% return on capital assets
9.46% net return on operating assets
2007 Market Share: 72.7% for ag equipment
2007 Parts/Service Absorption Rate: 66.01%
During a tour through the various departments of Vincennes Tractor in early June, Edgar Kuhlenschmidt couldn't help but express his feelings about the people working at the store. "We've got the best parts people in the business," he says as we enter the parts department. "We have terrific service people," as we pass through the newly expanded service department.
When it was time to sit down and answer questions about what it took to earn Farm Equipment's 2008 Dealership of the Year in the one- or two-store category, he looks across the table at Rick Linenburg, part owner and vice president of Vincennes Tractor, and credits him with keeping the one-store dealership pointed in the right direction. "He's a terrific promoter of the company. Rick knows the farm equipment business," he explains.
As the interview progresses, it becomes obvious that it's the combination of Kuhlenschmidt's experience and wisdom accumulated from 66 years of retailing ag machinery, as well as Linenburg's energy and creative thinking, that led to the dealership's selection as one of the finest farm equipment dealerships in North America.
While the numbers that Vincennes Tractor have amassed may be the first thing to jump out, the panel of judges who made the dealership their first choice in the category, also acknowledged that it's their creativity with customers and employees that tells the real story.
Since 2004, Vincennes Tractor has doubled its sales, growing by $7.9 million in '05, followed by a solid $2.3 million increase in 2006 compared to the previous year. It's aiming for $30 million in 2008.
Behind the Numbers
As for the numbers, surpassing $25 million for a single-store operation may be impressive in itself, but the continuing growth over the past 3 years tells the more important story.
Since 2004, Vincennes Tractor has doubled its sales, growing by $7.9 million in that year alone. It followed that enormous rise with a solid $2.3 million increase in 2006 compared to the previous year, and then another $2.2 million increase in 2007 vs. '06. Kuhlenschmidt is aiming for $30 million 2008.
Sales per full-time employee (28) in 2007 amounted to $893,000. When the dealership's 3 additional part-time people are included, the average sales per employee still surpass $800,000.
The dealership returned a solid 64.8% turn on its capital assets last year and, according to Linenburg, nearly a 9.5% return on operating assets. Kuhlenschmidt adds that having the facility paid off, of course, helps these numbers.
What's more important than the numbers, says Linenburg, is that the growing sales and good return on assets is allowing Vincennes to invest in the dealership, laying the groundwork for future growth. In the last 3 years, the dealership has invested $500,000 to expand the shop area, build a machine storage shed and dramatically expand its showroom.
In 2006, the service area was expanded by 4,800 square-feet and designed with oversized doors to accommodate the largest combines that John Deere produces. Equipped with overhead cranes, the new shop area has improved the efficiency of the shop, especially for large equipment.
Last summer, the dealership erected a 10,000 square-foot machine storage shed where it stores large, newly delivered equipment. It can also be used for machine setup if required.
Earlier this year, Vincennes began renovating and adding 3,200 square feet to its showroom, nearly doubling its size. The new addition will increase the size of its parts department and add office space, and also increase the dealership's display area so it can carry more John Deere consumer merchandise. When completed, says Linenburg, "We'll be carrying everything from John Deere safes and mailboxes to pink T-shirts."
While much of the increasing sales of such merchandise by other North American dealerships is coming from the growing numbers of urbanites moving to the country looking for a rural lifestyle, Linenburg says he hasn't seen a significant trend in that direction yet.
"A lot of the clothing we sell is purchased by local high school and university students," he says. The Univ. of Vincennes, a local junior college, has been a big part of the community for decades.
But the dealership has seen its sales of riding lawn mowers rise in recent years. Kuhlenschmidt believes a fair number of these customers grew up on farms but are no longer involved in farming. They still live in the country on half-acre or acre lots and want a riding mower to maintain their lawns.
Linenburg also casually mentions that he's noticed more and more farmers are landscaping their barns and outbuildings.
In fact, the sale of riding mowers has increased enough for the dealership to invest in a $75,000 fully equipped "on-line, ready-to-mow" mobile shop truck to service its growing base of riding mower customers at their homes.
The Market Share Battle
Another Vincennes Tractor number that gets attention is its 72.7% market share for its area of responsibility (AOR). Its sales territory, not only covers 4 counties in southern Indiana (Knox, Sullivan, Gibson and Pike), 2 in Illinois (Lawrence and Crawford), and includes prime row-crop acres that are generally going for $5,000 or more per acre.
"We've seen a 100-acre tract go for $7,000 an acre," adds Kuhlenschmidt.
And because the area is far enough south, much of the corn, bean and wheat rotation is double-cropped.
One of the biggest changes Kuhlenschmidt and Linenburg have seen in the last 5 to 10 years is in the size of the farming operations. "I used to think 2,000 to 3,000 acres was large," says Kuhlenschmidt. "Now, we've got some 20,000 acre and larger customers, which was unheard of 5 or 10 years ago."
"When you think about it," he adds, "the net worth of a lot of these farmers is much larger than our own."
While they still have 400- to 500-acre customers, the 3,500 to 5,000-acre operations is more typical for the area these days.
And as the farms of southern Indiana and Illinois have grown larger, the owners and operators have grown more sophisticated and demanding when it comes to their machinery and their dealers, making Vincennes Tractor's market share even more remarkable.
With 10 other dealers in the area directly competing for the same equipment dollars — some of which are multi-store operations — staying ahead of the pack is a full-time proposition for Linenburg and his one-store operation.
All told, he says, the biggest challenge come from the in-line competition of 6 other Deere dealerships, though he doesn't dismiss his day-to-day battles with 2 Case IH, as well as single AGCO and New Holland dealers either.
When it comes to market share, Linenburg says he isn't pushing to increase it, but doesn't want to see it slip below 60% either. At this point, he believes that to garner more of the available sales in the territory, he would have to "buy it." Instead, he's looking to improve the dealership's 66% absorption rate.
"We can do better with parts and service," he says, pointing to the dealership's significant investment in expanding and improving its facilities in recent years. That challenge falls to long-time service manager, Larry Stremming, who has purchased a stake in the dealership.
In noting what sets Vincennes Tractor apart from more than 100 other nominees for the Farm Equipment's Dealer of the Year, the judges highlighted the dealership's "creative thinking" when it comes to engaging and reaching out to its customers and the community.
Some examples include turning the traditional "John Deere Day" event into an affair Linenburg has dubbed "Farm Profit Preview." Another is forming a user group to keep customers up-to-date on developments in computer hardware and software. Another example, according to one of the Dealer of the Year judges, was adopting the "account manager concept" that replaces the sales-only responsibilities of Vincennes Tractor salespeople.
"Everything we do here is aimed at bringing value to the customer," says Linenburg, "And I'm not just talking about machinery. At the end of the day, we want our customers to say, 'This brought value to my operation.'"
Linenburg believes that dealers today must offer more than machinery. "We've helped train our customers for years. We bring in outside people on a regular basis to present new ideas or to address areas of concern as they arise. For example, conservation tillage is receiving a lot more attention lately because farmers want to look at ways to reduce their field inputs. We brought in Ray McCormick, one of our customers and an excellent speaker on no-till, to speak to other farmers."
For years, the dealership has organized meetings to demonstrate equipment functions like adjusting and calibrating their combines, planters and other equipment. "It's ongoing. It's nothing special to us anymore. It's expected," Linenburg says.
Farm Profit Preview. Annually, for decades, John Deere has produced a movie featuring its newest product developments and encouraged its dealers to organize an event to bring customers together to view the presentation. The event had become known as "John Deere Day." Linenburg found that the Deere production was worthwhile for his customers, but the format of John Deere Day had become stale.
Six years ago, with the help of a local radio station, Linenburg changed the format to that of a mini-exposition, bringing in local ag-related suppliers of products and services with 35 to 40 booths set up in the shop area. The exhibitors pay for their space and include some of the shortline suppliers, tire companies, local insurance agencies and even the local hospital, which takes a booth as well to offer free prostrate (PSA) screenings. (See sidebar on p. 38 for how this service affected one attendee.)
The program, which is called "Farm Profit Preview," is held in January. It's divided into 2 segments, with the morning session limited to Vincennes top 120 customers and potential customers. Following breakfast, the program begins with speakers covering timely issues for professional farmers that can range from conservation tillage, government programs, new products and the latest technology. The Deere video is shown as well. The attendees are then free to visit the exhibits until lunch, when they adjourn to a nearby restaurant. This group is welcome to return to the dealership for the afternoon session, if they wish.
The afternoon activities, which are advertised by direct mail, draw 1,500 to 2,000 people and follows a similar format, as the morning session. "We target the advertising now to welcome farmers, but we still get quite a few non-farmers," Linenburg says.
Nonetheless, the dealership feeds the entire group. Last year, it was barbecue.
Embracing New Technologies. One of Vincennes Tractors' core beliefs is the need to embrace new technologies early, and it's one that has served them and their customers well. As Linenburg puts it, it's a matter of "becoming the best you can before others see the benefits."
Vincennes demonstrated its commitment to being on the "early side" of technology trends when it hired an AMS (Ag Management Solutions) consultant "years ago, before most dealers even understood what AMS could bring to the table," says Lineneburg.
AMS is John Deere's umbrella term for its advanced technology products and services, which includes products like its GreenStar GPS guidance, Swath Control Pro for planters and other precision farming systems.
In fact, precision technologies have become such an important part of Vincennes Tractors' product and service offerings that AMS consultant Gerald Chaplin was offered stock ownership in the dealership. Vincennes has also trained its entire ag sales force to be AMS specialists.
To bring its customers into the loop, the dealership also formed an AMS users' group, which meets two or more times a year to stay up-to-speed on the equipment and services that are available for precision farming.
"We've been helping farmers with the mechanical set-up on their equipment for years, but we noticed in the fall of 2006 that we were getting a lot of calls from people needing help programming all the gadgets on their combines. Our sales and service people were spending a lot of time on the phone, so we added staff to address the issue and formed the AMS users' group," Linenburg explains.
While it's called AMS, he emphasizes that, "This is not a John Deere-only group. The needs of the membership are very diversified and include brand specific and non-brand specific hardware, software and interpretation skills. Our purpose in forming the group is to facilitate and serve the wishes of the members," he says. There is no charge to be a member of the group.
"We've gotten to the point where, if customers participate in these programs, we'll be glad to help them. If they don't participate, they may pay a fee for the service," says Linenburg.
The dealership also practices what it preaches when it comes to staying on top of advanced technologies. Today, it uses an advanced parts inventory control system and daily stock orders and is achieving a 6.51 turn on its parts inventory.
Business-to-Business Sales. The panel of judges also pointed to Vincennes Tractor's recognition of the changing nature of selling as another example of its "creative management." As one judge put it, "they understand the need for business-to-business salespeople."
Linenburg explains that years ago, John Deere pushed the concept of customer service reps (CSRs) and Vincennes Tractor dutifully bought into the idea. "But all I saw was our CSR following the salesmen around," he says.
"The more I talked to farmers — and the bigger they got — the more they said what they really needed was a point of contact. Whether it's sales, parts or service, they wanted to be able to call somebody and make something happen. They wanted someone they knew, could rely on and have a good business relationship with."
As a result, the dealership eliminated the position of CSR and adopted the concept of account manager with the salesperson charged with and rewarded for the added responsibilities of selling wholegoods, parts and service.
"They've become the single point of contact for the customers they serve and have a defined plan to call on all of them on a scheduled basis," says Linenburg. "If the salesperson is really good, they almost become a partner in their customers' operations."
In essence, he adds, "All of the salespeople are charged with the task of not only selling machinery, but promoting the entire dealership."
Building Around People
Both Kuhlenschmidt and Linenburg share the belief that Vincennes Tractor's success has been built around finding the right people — people that truly care about the customer — and then "educate, educate, educate." Linenburg estimates that the dealership invests $50,000-60,000 a year in employee training.
"From personal skills to technical machine training, everyone at the dealership is involved in training," he says. "Each product group has at least one employee from each department who is given all of the training offered on each product."
He's also adamant that employees understand what's expected from them and what they can expect from the company. A 124-page employee handbook is provided to each staffer that provides detailed job descriptions, work rules and other policies.
"We've written directions for handling customer complaints, customer follow up and all sales and delivery functions," he explains. "There shouldn't be any guesswork on how things are handled. We add and delete items as needed and make them available to all employees."
Managers also have full knowledge of financial information so that they can make good decisions and better manage their departments for profit, says Linenburg. With that, it's also clear that each department is responsible for achieving sustainable profits and controlling expenses, says Linenburg. "We expect managers to manage. They're responsible for measuring what they do and for making adjustments as often as needed to achieve desired results."
Beyond this, he says, Vincennes Tractor employees are expected "to treat customers and their co-workers right. We try to continually reinforce the message that they need to listen to their customers and we do the same with our employees. If you listen, you know they are always talking to you, trying to tell you something."
As much as Linenburg wants his salespeople to become partners with their customers, he says, dealership management does the same with its customers and employees by involving them in planning the growth of the dealership.
Linenburg refers to the planning that took place when he and Kuhlenschmidt built the current dealership in 1996. He, Debbie, his wife and dealership office manager, together with Larry Stremming, the service manager, came up with the main ideas for the new facility. It was then turned over to the employees for their input. While the design process took 9 months, everyone at the dealership was happy with it because they felt a part of it.
An article in the November/December 1996 issue of Farm Equipment entitled, "Designed by Everyone," called the list of suggestions that the dealership employees came up with "a blend of common sense and innovation that can happen when dealers seek input from folks who work in the business."
Linenburg continues to practice collaborative management with his staff today and credits the approach with the dealership's continuing solid financial results. "We keep expenses low as a percent of sales. It's not always easy, but we try to make purchasing decisions as a group. If Larry [Stremming] wants a new service truck, we sit down and talk about it, look at the options and try to get what we need."
Being a natural promoter, Linenburg adds that he encourages his staff to do the same. "We want our folks to be active in the community and promote the dealership and our products in everything they do."
By keeping them involved in planning and operation of the dealership, he believes they have a stake in its welfare.
Looking to the Future
Kuhlenschmidt finds all the talk about dealer consolidation and the trend toward multi-store operations more than a little ironic. While Vincennes Tractor operates as a single-store business today, his original dealership, called Farmers Equipment Co., headquartered in Evansville, Ind., had, at one point, operated 5 John Deere stores in southern Indiana. "We were a multi-store dealership before it was fashionable," he says.
"We were ordered by Deere to break it up because they were concerned about 'having all of their eggs in one basket' and afraid we would monopolize southern Indiana."
Following Deere's directive, Kuhlenschmidt sold four of the stores to his partners at the time. "They were glad to buy them," he adds. "Now, 30 years later, Deere is telling us that we should go back to more stores."
Today, he says, $30 million in annual sales should hold the dealership in good stead for 4-5 years before manufacturers raise the stakes to $50 million a year in sales. "That's the direction it's heading for equipment dealerships."
But with all the consolidation that's already taken place in the region, Linenburg says, "We don't see a lot of options for mergers or acquisitions. Our single-store sales are already higher than some of the multi-store groups around here."
In the meantime, they say they're mulling options for future growth. "These days, if you don't move forward, you're moving backward," says Linenburg.
For the moment, though, the dealership has other issues to grapple with.
One of which is the pressing need to push harder and smarter when it comes to early-order programs. "This has been the strategy for several years, but it really hit home this year," says Linenburg. "We've been pre-selling 90-95% of our combines, sprayers and planters on the early-order program for several years. We're accustomed to it and our customers are becoming more accustomed to it, as well."
The bigger problem is that early orders are being pushed even earlier. "We just finished planting in June and now we're into our planting program for next year, but we're being told we need to be even farther out than this and it's creating a lot of stress. We don't know what the used machinery value is. We don't know how much the farmer is going to use his equipment between now and then. We don't know what the price of the new equipment is going to be.
"We ask for price commitments from Deere and they have a protection program, but in reality, until they source the order, it doesn't mean much," Linenburg adds.
"We just lost a good-size deal over that," says Kuhlenschmidt.
But like most things, Linenburg puts the onus for dealing with issues like these on he and his staff. "Our ability to adapt and change and understand what the farmers are asking for is what we need to do," he says. "We're going to continue inviting customers to come and just talk and I plan to continue spending an afternoon every week on customers' farm, just to say 'Hi.'"
"When we get the new showroom finished, we're thinking about having a hamburger or hot dog lunch on Fridays. We'll charge, maybe 50 cents, and donate it to charity or something. We're not sure yet."
You can see their minds working.
Vincennes Univ. Plays Lead Role in Developing Service Techs
Rick Linenburg is always looking ahead at his dealership's next major challenge. For years, it was apparent that Vincennes Tractor, Vincennes, Ind., was having difficulty finding and developing service techs. He wondered if the well-established, local junior college, Vincennes Univ., could help fill the void.
In 1983 he began exploring the possibilities of establishing a technician training program through the college. "I worked with Vincennes Univ. and John Deere for a year and a half to put the right people together. Once it happened, it was a done deal," he says.
From that meeting, a 2-year program evolved to develop technically competent and professional agricultural, commercial and consumer equipment service technicians. John Deere's agricultural marketing center in Lenexa, Kan., sponsors the program, with administration and operations handled by the university.
"This has been our number-one source for technicians for several years now," says Linenburg. "The program includes humanities-type courses as well as mechanical and technical coursework, and the students graduate with an Associate's Degree."
The students receive technical training on John Deere agriculture, commercial and consumer equipment and related products, both new and pre-owned. This is done through a combination of classroom instruction, hands-on laboratory instruction, and supervised work experience at a John Deere dealership.
The hands-on portion of instruction takes place at the John Deere Training Center, an industrial-rated 15,000 square-foot shop with a wide variety of diesel engines, complete selection of transmission and differential assemblies, hydraulic components, and global positioning systems.
Students are required to obtain a sponsor from an authorized John Deere dealership. The university works with them to help find a sponsoring dealer and with the dealers to locate qualified and interested students.
Vincennes Tractor participates in the program by sponsoring students as well as loaning equipment — tractors, combines and AMS gear — for the students to work on. Dealers are also responsible for providing students with training-related employment during the work periods. Students pay for their own tuition, fees and textbooks.
"We've got a great working relationship with the university," says Linenburg, "and it owns a small airport about 5 miles from the dealership. In August, they'll shut the airport down for a day so we can use it for our AMS Field Days, where we demonstrate Deere's auto-steer, swath control and other AMS products. It's a good resource for us."
About the program, he adds, "We use the students as interns and it works out great. It's a pretty good part-time labor pool. I used to say, 'If I found a good mechanic, it would take 5 years to make them a good John Deere mechanic.' That's down to about 3 years now."
How the Mini-Expo Saved a Life
When Rick Linenburg hit upon the idea of organizing a mini-expo at Vincennes Tractor, he looked at it as another way to reach out to the dealership's customers and the Vincennes, Ind., community. No one at the store expected to receive a heartwarming letter they later received from one of the attendees.
The expo features displays of many of the local ag-related suppliers in the area, but the Vincennes hospital has also become a regular exhibitor and offers PSA (prostrate specific antigen) screenings blood tests to detect potential prostrate cancer.
"The hospital says it's one of the their best events because they reach people they don't normally see," says Linenburg. "They bring several nurses down and they always have a line of guys waiting to be tested."
In December 2006, the dealership received a letter from a local farmer about the event.
"I owe a debt to someone there for maybe saving my life. I am in a hospital bed in St. Louis where I had a prostatectomy performed two days ago. This was the result of a biopsy taken by my doctor there in Vincennes. My PSA number had risen rapidly over the past 5 years, which made the doctor suspicious.
"But I'm writing to thank you because my two initial blood tests were taken at your 'John Deere Days' in 2001 and 2002.
"Had it not been for the Lord's intervention in directing me to your free blood tests, I may never have known I had cancer until it was too late.
"One way I thought to repay you was to buy a tractor from you. I never told Rick or Jim, but I never priced a tractor anywhere else. I was determined to buy one from you. My many thanks go out to you for the tractor, but especially for having the booth to take the blood tests."
What the Judges Say about Vincennes Tractor
- "This single-store operation won out over 2 other outstanding two-store operations, which speaks volumes."
- "Very high dollars generated per employee - best in class - and excellent market share at 72.7%."
- "Impressive management procedures in place and a firm belief that all departments must obtain 'sustainable' profits."
- "Outstanding parts turns, changing sales approaches to the account manager concept, very strong growth during the past 3 years - nearly 100%."
Industry's Best Dealerships Recognized in 4th Annual Award Program
LARGE, MULTI-STORE OPERATION: Miller Farm Equipment, Moosomin, Saskatchewan
ONE- OR TWO-STORE OPERATION: Vincennes Tractor Inc. Vincennes, Ind.