It would be difficult to find a farm equipment dealer in North America who hasn’t in some way been affected by the consolidation of the retail side of the business in the last decade. Whether or not they’ve yet been told directly — or not so directly — that they must make the decision to be either a buyer or seller, to expand or exit the business, it’s on their mind. As the days pass, it’s becoming a front of mind issue. Dealers know it’s something they need to come to grips with. Either take control of it and set a course, or have circumstances or someone else dictate the future.
Howard Wickham will tell you he’s one of those dealers. But, he says, consolidation, which means fewer dealership owners, not necessarily fewer dealer locations, is only the most visible indication that the industry is in transition.
“More than consolidation itself,” he says, “what’s kept me up at night is keeping Wickham Tractor relevant and a business that’s sustainable, because I know that having two stores over the long haul is not sustainable and is not going to make it regardless of how profitable I am.”
He says the big swing toward consolidation has not happened with Case IH or AGCO dealers in his part of the world yet, but he knows that it’s right around the corner.
Locations: Fort Morgan & Sterling, Colo.
Major Line(s): Case IH, Kubota
Shortlines: Krone, Snapper, Crust Buster, H&S, Bush Hog, Unverferth, ProAg, Bestway, Art’s Way, Trimble, Land Pride, Case IH AFS, Purina Feed
Employees: 30 at both locations
2012 Revenue: $22 million
“We’re all talking about it. We’re all looking at it; who’s going to be the consolidator of the red equipment in northeast Colorado. It’s still an unknown, and Case is not coming in and saying it’s going to be you or it’s going to be you, or you sell, you buy, like Deere did.”
Wickham says Jim Walker, Case IH’s vice president of North American operations, has been to his store in Fort Morgan, Colo., and he’s assured the dealer that forcing consolidation is not the approach the equipment maker is taking. But he’s been told that Case IH is there to facilitate things and to help in any way it can.
Howard Wickham (ctr) is flanked by his sons Jason (rt) and Brad, who earlier this year purchased Wickham Tractor from their father. To maintain the dealership as a “relevant” business going forward, Howard said, “I either had to get on board or get out of the way,” to allow his sons to implement their vision of growth.
“We’ve talked and he likes the fact that I had a succession plan and two very capable sons,” Wickham says. And late last year, Wickham Tractor put that succession plan to work. While they’re still waiting for the official nod from Case IH, Wickham has received the company’s verbal blessing and on January 1, 2013, Jason and Brad Wickham became the third generation of the family to own Wickham Tractor.
Jason Wickham: ‘A Sense of Urgency Came Over Me’
Jason Wickham says he’s noticed a change in himself since he and his brother bought Wickham Tractor from their father at the start of 2013. “A sense of urgency came over me shortly after taking ownership of the dealership and realizing I’m the go-to guy. Everyone in my life has seen it. It’s both energizing and exhausting.”
After spending his youth working at the dealership, he earned his B.A. in ag business from Colorado State Univ. Upon graduation he moved directly to Sterling, Colo., to help his father open Wickham Tractor’s second location in 1998. Once it opened, he worked there full time, “working 100 hours a week completely immersed in the business,” he says.
But he was lured away to manage one of his father-in-law’s seamless gutter businesses. After 2.5 years, he returned to Fort Morgan and Wickham Tractor. “I knew I made a mistake within the first year of being away. I love this business and it’s my passion.” Since returning to the dealership he has focused on wholegood sales.
Howard Wickham has known for some time that keeping his dealership relevant and a viable business for the future would mean growing by expanding. But that wasn’t necessarily his vision for his own future. At the same time, he says it became apparent that something had to give.
He was still a few years south of 60, but his sons, who he calls “capable and competent,” were pushing 40 years old and had spent their entire working lives at the dealership; Jason as a “high-performing” salesman, and Brad who’s talent for organization and administration put him in a position to oversee the aftermarket portion of the business. But looking down the road, the elder Wickham says, “We had a difference in our visions for the future.
“I knew that Wickham Tractor needed to grow and expand to keep from getting run over, but I didn’t want to. I didn’t want to take on more debt at this stage in my life and to do what it was going to take to become the consolidator of northeast Colorado, but they did.”
To do that, the elder Wickham says, “I either had to get on board or get out of the way. About 4 years ago, it all started to really come into focus that if I just kept doing it my way and rode this thing out, and rode this horse into the sunset till it died, there wasn’t going to be a future for Jason and Brad.”
Working with an industry consultant who Howard considers a 20-year friend, the Wickhams began the process of transferring the ownership of the dealership from one generation to the next. The big question that needed to be answered first was how would father and sons reconcile their different visions for the future and the very different desires of how to go about it.
- Succession plans can change, but the need for planning doesn’t. Have a plan in place to take advantage of the most opportune time to implement it.
- Utilize experts — legal, financial, industry — to make sure you have all your bases covered when developing your succession plan.
- When family is involved in your succession plan, create written guidelines as to who is responsible for what and make sure everyone involved signs off on the agreement.
The consultant advised that regardless of how they did it, what they needed to do was ensure the business was set up to be a high performing, highly profitable dealership. “He told us this puts us in the driver’s seat for a lot of things,” says Howard Wickham.
In addition to the industry consultant, Howard also called upon another long-time financial advisor, the Rainier Group out of Oregon. He says they were instrumental in putting together the structure for an organized transition, as well as the dollar side of the succession plan.
A Time to Decide
The financial aspects were pretty straight forward, but other dynamics were at work, like those of doing business within a family, especially with two sons with very different personalities. Just as important was the fact that Howard wasn’t quite ready to retire.
Brad Wickham: ‘I’m Excited & Energized with the Challenge’
Brad Wickham has been working at the dealership in Fort Morgan, Colo., for his father since he was a kid. After graduating from Colorado State Univ., where he received B.A. in business administration with an emphasis in finance, he returned to the dealership, but that wasn’t his dream at the time.
“I always had the goal of going to work on Wall Street, but when I met my wife, who was from the area, we just came back to our hometown and started working at the dealership. I started out in parts, just a parts counter guy and then parts management. From there I started the parts and service coordinator position for both Fort Morgan and Sterling locations.”
He says he’s both excited and energized about stepping into his new role as co-owner of Wickham Tractor. At the same time he’s keeping his feet planted firmly on the ground.
“We’re into some really good times right now and that makes it fun. I also realize that it won’t always be as lucrative as it has been. However, for the foreseeable future it does look pretty damn good. That in itself is exciting.”
Like so many veteran dealers, skyrocketing equipment sales during the past few years was the time Howard had been waiting for his whole career. “One side of me, the greedy side, said I’ve been waiting for these times to come for 25 years — I’ve been through two major ag cycles, and survived both — I’d kind of like to enjoy it while it’s here because I sure paid my dues.” But his “other side” told him it would be more advantageous for his sons if he sold the dealership to them now, in the middle of the agricultural boom.
The elder Wickham was still hesitant. The dealership had provided a good living for him and was continuing to do so and he wasn’t ready to retire. “What I didn’t have was a vision of the future where I saw myself buying more dealerships and creating a mega-organization. That is not where I wanted to finish out my career,” he says.
But the boys were anxious to get on with it. “I looked at the situation and knew they were right,” says Howard.
Mapping Out a Family Plan
The time had come. “I had to decide to either ride Wickham Tractor into the dust or get out of the way and let it go where it needed to go to be relevant. So we mapped out a timeline and I signed off on it and agreed that I would sell some more stock. I couldn’t afford to give it to them because this was a big enough part of my retirement that it was important.”
At that point, Jason and Brad each owned 10% and Howard sold them another 6%, then another 5% giving each son 21%. “My plan was to work until the end of 2014 and during the next few years I would mentor them and work myself out of a job,” says Howard. The brothers would take on various roles of a general manager. The natural progression would have Jason taking over sales management and the wholegoods side of the business. Brad would focus on the aftermarket and administrative side of the business. Howard would sell them the rest of his stock at the end of 2014 and stay on as a member of the company’s Board of Directors, but would no longer work fulltime.
But for the same reason Howard wanted to stay on a “little longer,” his sons wanted to move into full ownership, and last September, the brothers approached their father and asked what would it take for him to sell the remaining shares to them right then.
According to Howard, the motivation behind their wanting to move up the timeline was things were going so well in terms of industry wide sales, Jason and Brad wanted to take advantage of the cycle before it cycles back down to more normal times, which they believed was going to happen at some point. This would allow them to pay off their debt quicker.
Sometimes Diversification Pays Off — Big Time
From bulk oil to irrigation, over the years Howard Wickham has been willing to look at different ways of expanding his farm equipment business and building on the success of Wickham Tractor. Sometimes it paid off. Other times it didn’t.
One diversification move that continues to pay big dividends is animal feed. In this case, it came out a need to survive rather than expand.
Wickham says he got hooked up with Purina when J.I. Case cancelled the dealership’s contract in 1985. To that point, Wickham Tractor was a Case, New Holland and Ford dealer. “We were growing with Case when they came in a dropped the bomb on us in 1985 and told us they were going with the IH dealer down the street.
Wickham says he was pretty sure that wasn’t going to work out and 5 years later the equipment maker was back knocking on Wickham Tractor’s door pleading with the dealership to take back the Case line. “But that’s a whole story in itself,” says Wickham.
Case pulling its contract created a 40% gap in revenue for Wickham. At the time, Purina was trying to improve its distribution network and was looking for well capitalized, established businesses that knew how to go out and sell product rather than just have a feed mill.
According to Wickham, the traditional feed dealer in 1985 typically had a mill, but no salesmen on the road. “They pretty much sat around and took what business they could from their mill. Purina knew that model wasn’t going to work. So we took on Purina that year.”
In northeast Colorado back then, he explains, most people were farming in the summer and feeding cattle in the winter. So the feed business was big in the winter, slow in the summer.
“We were always looking for some way to balance this thing out, so we took on Purina’s feed line. We lost money for the first 3 years, but since then it has grown every year into 20% of our annual revenue,” says Wickham.
Most of it is commercial dairy feed, but Wickham Tractor also handles bag feed for companion animals out of the parts department. But most of it is handled in bulk trucks that pick it up at the Purina plant in Henderson, Colo., and deliver it to dairies, “It’s the high value, high end part of their rations,” says Wickham. “We don’t sell any commodities, it’s all the high value stuff.”
What’s so attractive about this segment is that Wickham is doing it without a lot of overhead. The dealership has two people focused on it: a truck driver and a manager/salesman.
“When you come to Wickham Tractor, you don’t see an elevator or bins, but we’re one of Purina’s biggest dealers — in the top 5 west of the Mississippi and the biggest in Colorado.”
“They needed the additional revenue to pay me off so they could start implementing their growth strategy,” Howard explains. “If I were to hang around and milk this thing, I’d be screwing up their future.”
So Howard came up with a number. It was a figure that would leave his wife and him debt free. “I told them if they could put so much down, I would finance the rest over 10 years and we would accelerate this thing by 2 years,” says Howard.
For his part, Howard says he began to survey the lay of the land and with the “Fiscal Cliff” looming large and believing that the taxes on capital gains would be increasing after the first of the year 2013, it also looked like it would make sense for him to move up the time frame of the transition.
Because Howard believed there was only a 50/50 chance it could get done, he didn’t take it to Case IH for approval. But by December 30, 2012, Jason and Brad had secured financing and the corporation they set up acquired the remaining 58% of the stock and the sons were proud owners of Wickham Tractor.
A new timeline was set up where Jason and Brad would assume the remainder of Howard’s duties and he would then work at the pleasure of his sons. “After that it would be however much I want to work,” says Howard.
Of course, the financial and operational aspects of the transition would be the easy part. The dynamics of two brothers owning the business on a 50/50 basis was another matter altogether.
Howard still remembers how difficult it was to watch when his father and uncle decided the dealership wasn’t big enough for both of them. “It wasn’t pretty,” he says. “That’s the last thing I want to have happen with my sons, but there are so many similarities. I see my dad in one of them and I see my uncle in the other one. It’s going to be the 800 pound gorilla sitting in the room. But we’ve been partners for about 5 years, and we’ve learned a lot about what it takes to work as partners. I was a partner with my dad and it was pretty easy. We had a mutual respect for each other. Whenever we disagreed on something, we both just stepped back and said, ‘Wait a minute. If he thinks I’m wrong on this I better rethink it.’ But that’s not the way it usually is.”
But it’s working very well right now. “When I do walk out the door, if I don’t stay involved either on the board of directors or as a trusted advisor, they’ll just have to work things out.”
Stepping It Up
No one knows this better than Jason and Brad Wickham. Without asking, they admit they have different and distinct personalities. “In my opinion, we’ve always had a good working relationship, but we’ve never been in or on top of each other’s business, so we’ve always kind of been responsible for different things in the dealership. And growing up we’ve always been pretty close, but we’re opposite personalities,” says Jason. “We’re as different as you’ll ever see, which is a great thing. It’s a blessing and it’s also a curse, but it allows us to concentrate on different facets of the business. So we do need each other from that perspective.”
Even though they’re responsible for different facets of the dealership, Brad explains that he and Jason always compete. “From time to time, some of that competition has created other issues, and that is what we are currently working on. But when one of us genuinely needs help, of course, we’re there for each other, but on the surface, we’ve competed a lot. We’ve argued a lot, we think that each of our ideas is better than the other one and all that stuff. I wouldn’t say that we’ve had a harmonious working relationship, but we do have respect for one another and we are working on the other issue; once that falls into line, you better watch out.”
Jason adds that it’s like developing any relationship. It takes work. “Brad and I just became 50/50 partners in the business and we are concentrating on growing our current business. We’re also growing our partnership together.”
In a year or so, Howard will fade from the picture, and they will create a board of directors to guide them in growing the business, while keeping them pointed in the same direction. In the meantime, they’ve set up guidelines that define what each is responsible for and have agreed to respect what they’ve agreed upon.
While Jason is less risk averse than is Brad, both are less risk averse than Howard. They both agree on this.
And another thing they agree on is they must grow the dealership if it’s to remain relevant. With only a few months behind them as partners and owners, they have nothing cooking at the moment in terms of expanding, but they know it must come.
Brad believes they have a solid base to start with when it comes to staff. “Today, we have the best group of people working in the dealership who can take this to the next level.”
He adds that it will be imperative for the dealership to go after market share, which Howard estimates is about 35% for tractors. “We’ll need to go after competitors and we’ve succeeded in that recently. It will also involve getting more of our current customers’ business.”
According to Jason, market share will also be a target. “Any dealership with a strong desire to be around for the long haul had better take market share very seriously, whether they sell red equipment or green equipment. Once you’ve mastered the balancing act between profitability and market, you’ve started to solve the puzzle of our whole business,” he says.
As far as diversifying the business, Jason says he and his brother are on the same side when it comes to this. “Iron is what got us where we’re at and iron has been what we’re good at. We’ll look at other opportunities, but for now we need to stick with iron.”
At the same time, Brad says, the duo aren’t afraid of change. “One of our strengths will be our willingness to change, both of us. We can change and we can adapt very quickly. I think this is an advantage.”
Concerns Going Forward
What, if anything concerns the Wickham brothers as they move ahead with their vision?
Brad says he’s pushed to buy the business for the last 4 or 5 years because “I have confidence in myself and wanted to step up and do it. So I’m excited and energized, but it’s like night and day different because we take things a lot more seriously now. We both understand that the buck stops with us.”
But he adds, “My biggest fear going in is our relationship and working together with Jason. So far, so good, but I know we need to work hard at it.”
As for Jason, what scares him most is used inventories, or “being on the wrong side of millions of dollars of used equipment when a downturn happens and our used equipment values get cut in half. What I’m afraid of more than anything is that we fail and it’s because of me.
“The fastest way that I can personally sink this ship is screwing up on inventory,” say Jason. “So I tend to over analyze it because I’ve got to be very careful. I look at every trade as a purchase made by me for the dealership and I am personally responsible for each one of them. So, while it scares me, it’s also one of my strengths.”
As for Howard Wickham, he says he’ll be around to help if Jason and Brad need him, but he’ll also be pursuing other interests. “My wife and I have been building a rental business for the last 12, 13 years, where we buy homes, refurbish them and rent them. That’s my hobby.”