Inaccurate machine reconditioning can completely wreck inventory. If the estimate during the sales process is too low or something was missed, the end result could be a loser for the dealership. If the Recondition Estimate is exceeded, the unit could be sold for a loss. Writing machine book values down and paying interest, costing the dealership money and negative margin selling opportunities demotivate sales reps. On the flip side, over estimating can have the same effect. It is easy to put too much cushion in reconditioning costs and miss the deal. So instead of creating margin, volume and market share via aftermarket and wholegoods, the deal is gone. You can generate margin having machines available for sales reps to talk to customers about and sell. It is easy for salespeople to become demotivated by stagnate inventory they have pitched over and over again. How do you balance this fine line we walk? In my opinion, the sales department needs to have an inspector.
One question I get when I bring this up is, “Why would we hire someone to inspect possible trades when we have a shop full of techs that can do the same thing?”
This is true and they are really good at what they do. That’s why they need to stay in the shop working on revenue-producing jobs. The more time they spend looking at equipment the dealership does not own, the less revenue they generate. The service department’s time is valuable and needs to be spent billing labor hours. Also, because of their nature, techs are going to lean toward fixing if something is questionable. There’s nothing wrong with this. That is what they are paid to do, find billable labor hours and bill them. The residual affect is over estimating the reconditioning costs and an increased trade difference. These issues will need to be noted and ultimately shared with the customer.
The sales inspector would be the liaison between the sales department and the service department. When a machine is going through the sale process the inspector would examine the machine. Once this inspection was done the evaluator would then know if the machine was meant for retail, wholesale or auction. Having a clear picture of a machine during the sales process will go a long way in securing the overall machine salability and, moreover, profitability. The margin of error has greatly narrowed and, like it or not, you know what the machine truly has to offer.
Manage the Reconditioning Process
“Having a clear picture of a machine during the sales process will go a long way in securing the overall machine salability and, moreover, profitability…”
The other key role an inspector would play is handling the reconditioning process once the machine has been traded. The inspector would handle approving all work orders for used equipment inventory. The machine inspector would be held accountable for the budget established during the sales inspection process, as well as hold the service department accountable for getting the machine ready in a timely manner and doing so at or under budget. If the trading location is too busy to inspect, detail and service the used machine, then the inspector would have the authority to relocate the work to another shop within the dealership group.
In the current economic state of the ag equipment business, it’s hard to justify such a position. But, this position will more than pay for itself by decreasing overall time to sell, spending less money during the recondition process, and increasing parts and service sales. The customer will have more control over what to fix during the sale process. If a customer knows the first $10,000, for example, is covered they are more likely to spend additional money in the shop and at the parts counter. The dealership now has better control over the outcome of the machine’s profitability.
If you would like to hear more conversations like these, tune into Moving Iron Podcast, which can be found on iTunes, Google Play, Stitcher Radio, TuneIn Radio, and SoundCloud. You can also visit my website, www.MovingIronLLC.com, where you can find recent Blog Post from the Moving Iron Blog, past and current episodes of Moving Iron Podcast, After the Bell with Chip Nellinger, and the Tax Tip of The Week with Glen Birnbaum. So until next time, let’s go move some iron.