Q: What do you see as the biggest factor in increasing your used turns?
A: There are two things you have to consider. First, you have to understand the washout cycle. The washout tells you how long you will hold equipment and how many units you will need to sell through to get to a cash/no trade scenario. This helps the balance sheet items as well cashflow. This will then lead to the next equally important item — product mix.
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Product fix affects turn as much as washout does. You need to have an understanding of what products move the fastest and the slowest. For example, I want to turn my combine inventory at least 2x a year, but I also want a total inventory turn of 5x plus as well. The combine market is tight especially with the current market conditions. I have to turn to other market segments to pick up the difference. I look at tractors when filling the gaps. Tractors are sold all year and there are no early order programs. You can get a new tractor when the factories can build them. I want my tractor turn to be 8-12x, or more, per year. By having a high tractor, turn this allows other slow moving equipment not have to have as much pressure and the dealership is not basing its entire turn on the slowest moving equipment. At the dealership, preselling and customer prospecting have to be paramount. This is equally important for faster moving equipment as well.
The Washout Cycle — A Better Way to Manage & Sell Used Equipment
Casey Seymour swears by this strategy for managing used — and new — inventory for the best cashflow.