In my last article, I wrote about the importance of using the used equipment/remarketing manager to understand the current market conditions and outside influencers. Below are the three functions of Pillar One, the Centralized Appraisal Process, that I find most important.
- The used equipment/remarketing manager has to understand the current state of the used equipment marketplace and the outside influencers that will have a positive or negative effect.
- Have an unbiased look at the machine value based on past dealership sales history, current auction value, and finally, retail advertised price.
- Lastly, have NO emotional tie to the deal or the customer.
In this article, I focus on the function and importance of 2 and 3. I also share some of the pitfalls I have encountered when I have strayed off the path.
Early in my career, my primary job function was evaluating possible incoming trades and fielding internet and wholesale sales calls. When evaluating deals, I was objective with the information at hand. I tried very hard not to let outside factors influence me, like customer name, what they were buying or the volume of what they were buying. Once I completed the science side of the equation, the art side was left to solve. I would get push back from the sales reps and sales management. I would present my case, and the dance would ensue. Nine times out of 10, the numbers based on data stood. The one time we would step outside the lines, we ended up adding to our “Museum of Modern Farm Equipment” collection.
It was a practice proven more than once and had the same result. If I heard the words “Yeah, but” come out of my mouth or the mouth of others involved, I knew emotions had become invested and we were adding another piece to the collection. It never failed; the potential trades we had a vested interest in were overbooked and were not in the condition we thought, or I should say we hoped or guessed. Similar machines were priced lower and took less to recondition for sale. The customers naturally gravitated to lower-priced units, which sold faster and for more profit. The machines that we had been emotional about sat, developed a case of lot rot, became stagnant and were overwhelmingly sold for a loss.
One of my manager’s biggest mistakes was allowing me to make the buying decision for trades in my deals. I would follow the same steps through the science phase, but when I got to the art, I would bend and shift and come up with a million reasons why the “Yeah, but” made sense. I was a commissioned sales rep, and every deal I was working had a direct correlation to the size of my paycheck. You better believe I was emotionally attached to every trade-in.
Everyone has a watershed moment sometime in their life, and when it happens, it’s hard not to forget.
I was working on a deal, and part of the process was I needed my manager to sign off on every trade evaluation. I don’t remember the exact circumstances, but my values were getting grilled for this particular unit. I guess the numbers were that egregiously outside the norm, they drew attention. My manager and I went back and forth, and the final decision was made.
His numbers didn’t make my deal work, so I thought, and I said the words I had heard so many sales reps say in the past. These words showed I had thrown all sense and logic to the wind. “We have to put more money into this trade because it’s different!”
When I heard those words come across my lips, I knew I was wrong. It was like all of the times I tried to talk my way out of a situation with my father as a child — it wasn’t going to happen, and I needed to face the music.
I learned a valuable lesson about how emotions can cloud the ability to make sound business decisions if you are too close to the action. I don’t evaluate any trade deals I am involved in to this day. I gather the information and let someone else tell me what it’s worth. When I do this, the likelihood of me overreaching drops to zero. If you are closer than an arm’s length from the deal you are working, don’t go down the evaluation path alone. Get someone else who has an objective view of the market and let them tell you what they see. Unlike John Conlee, I promise it won’t be through the lens of rose-colored glasses.