“We’ve consistently made money over the years,” Jeff says about Lake County International, a single-store Case IH dealership in Madison, S.D. “All of sudden we go from $12 million in sales in 2008 to $18 million in 2009. How do you plan for that sort of thing?”
Managing that level of growth has been a new experience for the brothers and they had to learn on the go as the growth just kept coming: 18% revenue growth between 2009 and 2010 followed by a 13% increase in 2011 and 17% in 2012 when they surpassed $25 million in sales. And they’ve done it well.
But it wasn’t simply a matter of revenue growth that led to Lake County’s selection as Farm Equipment’s 2013 Dealership of the Year in the under $50 million in annual revenues category. It was very apparent to the panel of judges who made the selection that the dealership has handled its growth exceedingly well. Specifically, they cited the dealership’s more than $1 million in revenue per employee, its 97.2% absorption rate and its 24% return on assets as the prime reasons for their choice of Lake County International as the top dealership in its revenue category.
Lake County International
Employees: 22 (20 full time,
4 part time)
Major Line: Case IH
Other Lines: Krause, Gehl, Cub Cadet
Locations: 1 (Madison, S.D.)
2012 Revenue: $25,082,068 ($20,187,560 wholegoods; $3,029,686 parts; $1,864,822 service)
2012 Market Share: 48.4% (tractors over 100 horsepower and combines)
2012 Return on Assets: 24%
2012 Parts & Service Absorption: 97.2%
3-Year Revenue Growth:
2010: $18,753,820 (+18%)
2011: $21,342,104 (+13%)
2012: $25,082,068 (+17%)
“Achieving that ROA on a much lower total sales figure shows they have a great system in place,” the panel said in written remarks.
The dealership’s 48.4% market share in combine and tractors over 100 horsepower also added to Lake County’s credibility as a top dealership.
As far as expansion is concerned, the Blooms say they understand the pressure is on to get bigger. While there is no concrete plan to do so at the moment, they’re keeping their ear to the ground for opportunities.
Maintaining a lean organization and staying squarely focused on fundamental business practices has proven to be a winning formula for Lake County International. A major facility renovation in 2011 also played a significant role in managing the dealership’s strong growth in recent years.
Despite the rapid escalation in revenues starting in 2009 and running through this past year, Lake County has only added four full-time employees to its already lean 18-person staff. “All of our growth didn’t just come from wholegoods sales,” says Jeff. “Service and parts grew right along with it,” which also helps account for the dealership’s 97% absorption rate. It would also seem to be a clear indication of high performing full-time staff, supplemented by 4 or 5 part-timers on an as-needed basis.
Tom Bloom says the ability to handle the increased sales really lies with the dealership’s employees. “Feeling confident in going out and being aggressive and growing the business the way we have is a matter of knowing that we can handle the growth back here in the store.”
Jeff adds, “What I tell our employees when I go out and visit with them is, ‘I’m going to be making some big commitments and promising my butt off to these customers, so you’ve got to be able follow up for me.’ They understand that we’re putting a lot of trust in them.
“They understand that taking care of the customer at all costs is one of the core principles that guide this business. It means keeping our customers in the field, whatever it takes.”
He goes on to relate incidents of extra effort expended by Lake County employees, like recently when a tech was out at 2 a.m. helping a customer and then showed back up at 8 a.m. that morning to make sure the customer was up and running.
Lake County International saw its annual revenues rise from $12 million in 2008 to more than $25 million by 2012.
“I know every dealer will tell you about their great people,” Jeff says. “But I know I could leave for 6 months and the place would run itself without me because everybody knows what to do. When it’s crunch time and we’re extremely busy for 6 weeks in the spring and 6 weeks in the fall, everybody kicks in. Otherwise, we wrestle with what to do with our 22 employees and the few part-timers, because we don’t get much in the way of walk-in traffic. But I’m comfortable with that.”
On top of it, the Blooms say, one of the beauties of having a small, but dedicated group of employees is that many of them have “redundant” experience. “We all kind of did everything at one point or another and having that ability to shuffle people around definitely helps, especially in the crunch times,” Jeff says.
The other thing, he adds, is he knows his employees. “I trust each and every one of them and know they will do the right thing. I don’t think we’ve ever had an employee who has ever taken anything. I’d trust my employees with my children. They understand our culture just like I do.”
Baptism by Fire
“That it’s OK not getting every deal is probably one of the biggest lessons I’ve had to learn...”
— Jeff Bloom
Jeff has worked in the dealership for as long as he can remember. “I would come to the dealership with my dad when I was 8 years old and some days I would spend more time trying to get out of doing any work than I did working. But this is pretty much the only place I’ve ever been.”
Their father, the late Frank Bloom, bought out his partner in 1984. He unexpectedly passed away 2 years later and Jeff found himself managing a farm equipment dealership at the ripe old age of 28. His brother, Tom, was 18 and still playing football at South Dakota State Univ. at the time.
Considering the abysmal state of U.S. agriculture in the 1980s, Jeff’s introduction to managing a dealership proved to be his baptism by fire. But by that time, he was more than a little familiar with the hard knocks the farm machinery business had to offer.
“Those were very trying times when I took over,” Jeff says. On top of it all, the dealership’s main supplier, International Harvester was going broke.
Jeff recalls one day in particular when his father gave him his paycheck and suggested that he not cash it. “It was in 1982 or ’83,” he explains. “Twice a year my dad would pay our note at Northwest Bank (since acquired by Wells Fargo) and the very next day he would go in to get some new money. One day after paying off the note, the bank told him they would not renew it. That’s when my dad told six of us to hold off on cashing our paychecks. He wanted to make sure the other employees could cash theirs.
“I can remember the first 5 or 6 years when I ran the store, we would make a couple thousand bucks a year. That first year, we made $343. We were just cash-flowing. It wasn’t until the early and mid-90s when we started growing slowly,” says Jeff.
Focused, But Balanced
“The timing of our renovation project was perfect,” says Jeff Bloom of Lake County International’s facility expansion in 2011, which doubled the size of the dealership. Before the addition, techs had to wash down equipment outside in the winter.
These experiences taught the Blooms that focusing intently on the basics of their business and keeping close watch on key metrics — whether it was during growth years like these or more “normal” times — is what separates profitable from not-so-profitable dealerships.
What they measure most closely are aged inventory, turns of new and used equipment, cash flow and work in process. But it’s not only monitoring key business indicators — the real skill comes in knowing what to do with the information. And that comes from the experience balancing raw numbers against customer knowledge.
“We monitor the average age of the used and watch the new equipment coming due very closely. I hate paying floorplan interest,” Jeff says. At the same time, he doesn’t attach a cut-and-dry schedule or assign hard numbers to when equipment must be moved.
“Our goal is to move big stuff during the season of use,” says Tom. “We hate to go through a season and not sell a four-wheeler.”
Jeff adds that the dealership might write it down and look at moving it at a particular price. “We all sit down weekly and we talk about what we need to move and focus on it. I’m not a believer in taking stuff to auctions. I have taken equipment to auction, but I always feel like I can do a better job of moving it and control what I get out of it. We’ve been fortunate the last several years. We’ve hardly had anything around here that has a birthday or even goes beyond its season of use.”
On top of this, Tom points out they’ve nurtured relationships with dealers of other colors. “If we get a green piece, we’re really good about trading other John Deere dealers for red stuff and working out of the trades.
“I’m not sure that I monitor turns quite as much as I do moving the equipment and not paying interest.” Tom says they’re always looking for 3 turns.
“If it gets close to drawing interest, I’m not above transferring something, but I also see the value in having equipment on the lot. We keep a fairly good inventory because we’re a single store. As long as my cash position is good and I’m not paying interest, I can keep rolling product and I can be a little more aggressive, which means taking advantage of ordering programs and having the right equipment,” Jeff says. “Especially as equipment becomes harder to get, you need to be thinking 9-12 months out.”
“Being aggressive in growing the business is a matter of knowing we can handle the growth in the store...”
— Tom Bloom
As Lake County has sold everything on the lot the past 2 years, more than once they’ve wished they had a little more inventory. Experience also tells Jeff things are bound to change. “This business is cyclical and we understand the ups and downs it can take.”
Flexible, But Diversified
The Blooms also recognize that inventory levels are often dictated by the product itself. For example, Jeff explains, “With tractors, you need to have them on hand to be able to turn them.” That’s not the case with combines, though.
The dealership keeps a few of the smaller compact tractors around that it “ends up paying interest on,” and it tries to stay “fairly well diversified” in the types of tractors its sells. But customer preference is turning decidedly toward four-wheel drive units.
“We still sell a lot of the 100-140 horsepower units, but in the last few years we’ve started to convert a lot of our customers to four-wheel drives by explaining the benefits vs. larger MFDs and have developed a really strong following with our Steiger-type tractors. In our four-wheel drives, we get 60-70% market share and sell 15-18 of them a year, which is good for a small single-store located in a not really huge market,” says Jeff. “They’ve become our bread and butter.”
What the Judges Say...
“They have a 22 member staff, which is obviously very efficient with $1,140,000 of revenue generated per employee” ... “They had a very good ROA of 24%, which was 10% better than any other nominee in this revenue category. This is one of the main reasons they were picked as Dealership of the Year” ... “Their absorption rate of 97.2% was the highest of all nominees regardless of revenue category.”
Combines are different matter altogether. Clearly, the Blooms are not big fans of combine roll programs. “I can’t see how dealers are rolling combines for $20,000 a year,” Jeff says.
“We don’t have any new combines that aren’t sold. All of the new combines we have here are being serviced and ready to be delivered. I’m really concerned about the combine market we’re in right now. I think there’s way too many used combines and our companies are pushing for us to sell more,” says Jeff.
“I don’t want to sell more new combines in a year than we trade for. We need to get rid of the used in the same year without wholesaling them outside of our trade area. Otherwise they depreciate so much that you have no profit to work with. Fortunately, we’ve been able to do that and still maintain a healthy market share.”
Tom adds that, on average, Lake County sells 4-7 combines a year. But in the dealership’s view, volume isn’t always what’s important and, in fact, can be detrimental when you’re trying to balance sales and service.
“We’re driven by service. We need to be able to take care of the new combines we sell on top of the ones we already have out there. If you’ve got two or three techs who specialize in combines, it can be tough and scary for us as owners when your customers are counting on you to keep them up and running, but that’s our commitment. As it is, we really pull our hair out for 4 weeks during harvest.”
Back when combines cost $150,000, Tom says Lake County advertised itself as the “Combine Headquarters” and the fact that it sold more combines in southeast South Dakota than anyone else. That’s when a dealership in Dyke, Iowa, was rolling large volumes of combines — with disastrous results.
“I saw that as a time when we needed to sell more tractors, because we could sell tractors 12 months of the year and we sold combines maybe for a couple of months a year,” Jeff says. “But we stayed very focused on servicing combines. We have about 150 combine customers, and we make sure to get out and give them all free inspections and stay in touch.”
Over time, by taking a service-based approach instead of jumping into a combine-roll mode and having to worry about who the next two customers for that unit would be, Lake County was able to grow the part of the business that defines the dealership — service.
The dealership employs a semi-retired service manager as an “outside parts and sales person” who works about 3 days a week traveling to customers and soliciting lube and filter business. In addition to pushing sales and service, he’s the “follow-up” person and a regular touch point for customers who have purchased new equipment. “He’s always out there asking for the sale,” Jeff says.
He’s also the person who calls on Lake County’s combine customers, does an inspection of the unit and gives them a checklist of what should be done to keep the combine operating at peak efficiency.
“Within a couple of days by mail, they get an estimate on what it will cost them for parts and labor,” says Jeff. “Then they decide whether they want to bring it to us or buy the parts and fix it themselves. That’s another really good touch point because it keeps us connected to those 150 combines in our trade area. It’s really a wonderful profit center. In fact, it produces our best profit because the parts that we’re installing on the combines are expensive.”
According to Tom, between the 4 salespeople, precision farming specialist and part-time outside salesperson, Lake County’s top 100 customers “hear from us about once a week.”
This is particularly true in the mornings during the winter months, according to Jeff. “We don’t get that much walk-in traffic in the store and a lot of days nobody would know it if we didn’t unlock the front door until about 10 in the morning.” But it also means those consistent touch points are critical in maintaining loyal customers. “But we’re always on the phone, we’re always touching those customers in one way or another, making sure that they hear from us during critical presell times and/or inspection times for their combines.”
Like all farm equipment dealers, the Blooms have seen even their best, most loyal customers become more demanding. “We really see it during our really busy times.”
And the Blooms see their handholding and constant communication as a differentiator, something that sets Lake County apart as other dealerships continue expanding.
“It just seems like there’s always one more level of bureaucracy when you’re dealing with a multi-store. There’s just a level that Joe Customer doesn’t feel like he gets to touch when he’s dealing with a multi-store. And I think that’s one of the differentiators that we have,” says Jeff.
In fact, he describes the decision to not chase unit sales when it comes to combines as a defining moment for Lake County.
Asked about what events and decisions have defined the dealership and shaped it into the success it is today, the Blooms rattle off several — both big and small — that have reinforced their longer term goal of being a dealership built on service. From things like deciding to utilize Case’s Vantage credit cards in 1998, which saved them hours each week chasing down receivables, to expanding the store in 2011, which gave them the room to add service techs.
But the decision to not pursue sales volume when it came to combines may have been the one that set the dealership up for much of the success it’s experiencing today.
“Not worrying about rolling combines and selling all of the new combines we were being pushed to sell, but keeping a market share that’s high enough to be able to maintain a continuous population of combines has been very important,” Jeff says.
“Not selling combines just to be the biggest combine dealer in the world was a defining moment. Deciding that we didn’t need to sell the most was OK; we just want good market share and a good number of combines in our trade area to be able to sustain a hugely profitable part of our business.”
Along those same lines, he adds that accepting that sometimes when you lose, you win was another defining moment in the dealership’s culture. Learning that losing a sale is sometimes the best thing is a difficult lesson to get your head around, Jeff says. Experience has demonstrated time and again that in many cases it’s the best thing.
“That it’s OK not getting every deal is probably one of the biggest lessons I’ve had to learn,” he says. “And it has happened to every dealer somewhere along the way.”
To Expand or Not?
With 5 outstanding years under its belt, and in light of the dealer consolidation push that is so prevalent in the industry, a logical question is if and when Lake County plans to expand its market area.
It’s clearly a question the Blooms struggle with.
Jeff says expanding merely for the sake of expanding isn’t something that appeals to him. His bigger concern is keeping his good employees and looking out for his family. “Tom’s 10 years younger than I am and the group that we have is pretty young, so I need to be thinking of them moving forward; is there enough room for growth within the organization? And then Tom and I both have children who might be interested in making a career in this business.”
He says he sees the advantages of branching out to spread risk across another trade area or two. He also likes the thought of taking an underserved area and growing market share by 10 or 20 points. “That’s huge,” he says. “We’re excited about the possibilities of looking at something like that, and also calling on the younger generations to grow professionally.”
At the same time, Jeff says, he would prefer to own and operate one great dealership vs. two or three mediocre ones.
Tom adds, “Supplier standards are getting tougher and tougher. They’re going to give more opportunities for dealers to expand. It just depends on if you’re willing to step up to that next level and be a dealer that’s going to do the things the mother company wants you to do. They’re certainly putting more cash requirements on their dealers.”
“I feel like it took us a lifetime to build this business and do I want to spend another lifetime building another one, two or three? Could we do it the way we want to do it? I never want to do things halfway,” Jeff says. “You want to build it right from the bottom up with service. I know that’s what it takes and I guess that’s the hardest thing for me. It’s interesting to see the dealers that you’ve gone to meetings with for 30 years that are disappearing one by one.”