80 Secrets of Highly Successful Dealersby Walter J. McDonald

This article is presented on the occasion of my 80th birthday and after nearly 50 years of helping equipment dealers achieve higher levels of performance. These are 80 of the more than 600 documented “success secrets” I have seen practiced by highly successful machinery dealers around the world. These “best practices” guide dealers to higher profitability, market share, cash flow and customer retention.

Many will apply to your business. Use what you can and prosper! Buy and utilize my books for full “how to” details. I’ll even include a free Self-Study Course and private coaching to help you with your self-development effort. So, Happy Birthday!

Sequence: Strategy, Customer Retention, Parts, Service, Rentals, Used Machinery and New Machinery.

Strategy1. Carefully evaluate which products into what markets.

Most dealers have far more business opportunities available than they can adequately support or effectively manage. This is the most strategic assessment you can make and the resulting decisions will have life or death impact on your future prosperity. Which opportunities should you pursue with vigor? Which should you abandon because they just drain your resources?

2. Properly define leadership roles.At some point in every dealership’s growth, the founder/owner focuses on and leverages his/her skills and decides to develop a highly competent team of revenue center managers. This decision to delegate authority and responsibility is not an easy one. But, by effectively managing your leadership role, owners/founders can nurture the growth of your management team and greatly improve the odds and prospects for your ultimate success.

Download Full Article3. Create a “Company Mission” that is sincere, meaningful and challenging.

Are you in the business to make money or to help customers reduce cost, improve productivity and increase profitability? If your “Mission” is the second option, this has enormous implications for your entire organization. Sales reps move from selling on price to problem solving and delivering value. Product support focuses on repairs completed when promised and within budget. Your whole

organization becomes a business partner with the customer. This changes everything.

4. Structure formal “Revenue Centers” with Open Book ManagementEach Revenue Center (Service Labor, Parts, Rentals, Used Machinery, New Machinery) must be led by a competent “Bus Driver” responsible for profitability, market share and customer retention. Revenue Center Financial Statements are the critical financial tool essential for dealer success.

An equipment dealership is really at least five different, unique businesses. These businesses are connected by an accounting and information system to optimize overall performance. Each Revenue Center has different drivers of profitability, market share and cash flow.

5. Creatively build and deploy sales and marketing investment. Begin with your website, your 24/7 on-line presence. Capture “active interest leads” from visitors. What about product demo videos? Photo stories? Customer testimonials? Company management profiles? Deploy and fully-utilized a CRM (Customer Relationship Management) system. Maintain accurate, complete customer records, especially emails. Organize and send regular e-Mail promotions for service,

parts and rentals at least 2 – 4 times per month. Monitor customer purchase transaction frequency

and determine who is purchasing less than six times per year. Engage these customers who are slowing down to determine why they are not buying from you. Why? 90% of dealer machinery unit sales are to existing parts and service customers who perceive their dealer to be their preferred vendor and who make more than six purchases a year. Closely monitor customer satisfaction levels because there is a very high correlation between customer satisfaction and retention.

6. Ensure competition-defeating product support investment.The most game-changing investments you can make are in your people. Service Managers and Supervisors must receive leadership and supervisory management training. And, they must be given the information technology tools to help manage work orders, technician productivity and customer satisfaction. Your Parts Managers must be given the information technology tools and training to manage the single most important performance metric in the dealership: “off shelf parts fill rate to service.” And, this fill rate must be balanced successfully against parts inventory turns.

7. Utilize information technology as competitive weapon. Most importantly, install, train and fully utilize a comprehensive dealer business system across all revenue centers. Expertise and effectiveness in parts inventory control will prevent a multitude of mega problems. Excellence in parts management cascades throughout the dealership and continues out onto customers. A

great Service Management module will illuminate labor productivity as well as customer support improvement opportunities.

8. Establish Quantitative Big Hairy Audacious Goals (BHAGs*) BHAGs must be clear and compelling so as to stimulate progress of your entire organization and create immense team spirit. “Achieve Absorption Rate over 100%” is an excellent challengerequiring superior performance from every manager. Ask me to send you my new color flowchart of “What Inputs Impact Dealer Absorption Rate.”*BHAGs were first introduced by Jim Collins in his Build to Last, first published in 2002.

9. Install mechanisms to create discomfort and dissatisfaction.The goal is to obliterate complacency and dissatisfaction with current performance levels--- to stimulate change and improvement before the external environment demands it.

10. Formulate a comprehensive annual Strategic Business Plan.Your Strategic Business Plan supports your Annual Budget and describes the steps you will take in each Revenue Center, each sales territory, and in each Key Account to achieve your goals for the year.

11. Structure a Formal Comprehensive Annual Training and Development PlanCreative, skillful and insightful employees are your most important asset. Each employee should be on a learning track that includes self-study, readings, formal in-company training, skills development. Focus programs on, for example, “Handling the Angry Customer,” or, walk-around product sales demonstration skills treaining for your new machinery models A, B and C

12. Build Strong Teamwork and Esprit de Corps The most successful dealers I have ever seen have a

very, very strong team play culture. Their entire employee organization demonstrates highly effective four-way communications. And “team leaders” in their very large field service organizations facilitate inclusion of everyone.

The following six areas of your machinery dealership are examined through a series of “audit questions.” Which of the “Success Secrets” are relevant? Highlight the “no” answers for further examination and possible improvement.

Customer Retention 13. Does your dealer management group

recognize and understand the positive correlation between employee satisfac-tion and excellence in customer service?

14. Does your dealership's new employee orientation program emphasize "Excellence in Customer Service" as a company philosophy?

15. Do your department managers empower employees to jump on potential customer service problems and resolve them with an extreme sense of urgency, with a 24-hour time limit on any customer problem?

16. Do you ensure that your front-line primary customer contact employees are always courteous and free of "Burn Out"?

17. Do you formally test and compare your company's overall service delivery and level of customer satisfaction to your key competitor's at least every 3 years?

18. Does your Dealer Principal and each Department Manager (including Administrative & Finance) visit your top 25-30 Accounts* on a regular basis to build strong personal ties and to solicit feedback on how you can improve service and tech support?

17. Do your Dealer Principal and department Managers conduct customer round table discussions at least annually on what you could do to improve your overall operations and product support?

18. Are the employees in your company being trained to reassure customers of their competence through communications skills, product knowledge, safety procedures, listening skills and problem-solving skills?

Benchmark Performance Standards: CUSTOMER RETENTION Net Promoters Score® over 60. (Google up

definition and explanation.) Customer Retention Rate over 95%. Annual Dealer Exec-Key Account Exec

visits: improve poduct support, producitivity.

Achieving Excellence in Dealer/ Distributor Performance by Walter J. McDonaldIn-depth examination of the 48 Critical Profit Variables essential for dealer success. Each essential quantitative performance bench-mark is explained in detail with practical “how to” guidelines and coaching support.

Extensive insight into performance improve-ment strategies, programs, tools and, techniques for Sales, Parts and Service Managers. Practical ideas from the most successful dealers around the world on “How to” increase profitability, market share and customer retention. Special Report on accelerating dealer Cash Flow.374 Pages. Paperback

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Parts 19. Is customer service and parts availability

the primary goal of your parts business, your operating philosophy and your new employee orientation?

20. Does your business have the image of “total product support” for every model of equipment you sell?

21. Are you making regular e-mail promotional mailings? Email customers purchase twice to three times more annually than customers not having email addresses in the dealership’s data base. Customer retention rate increases 20-30% for any one customer receiving a consistent dealer email promotions.

22. Do you monitor off-shelf parts fill rates over the counter to direct sales accounts as well as to the service department?

23. Do you have strict guidelines on limited access to the parts storage area so it is easier to track and control the inventory, and prevent leakages, with formal policies to ensure that all parts are charged out?

24. Have you set up disciplined parts receiving procedures to properly check in items, verify bills of lading, check for damage handle paperwork quickly, update inventory?

25. Do you monitor variations in manufacturer lead times for various categories of parts so you can properly adjust safety stock?

26. Can your mechanics easily order parts from their service bays?

27. Are you fully utilizing all of the capabilities and management reports of your parts information system to manage inventory by SKU, optimize fill rates, turns, margins, minimize obsolescence, control emergency orders, minimize freight costs?

28. Are you working on setting up a 100% fill program with your largest, most important customer accounts based on their specific parts usage list and fleet profile?

29. Do you "cycle count" regularly to check shelf quantities vs. your stock report?

30. Is there a formal training and development plan for each parts employee with emphasis on effecive data analytics and inventory control?

Benchmark Performance Standards: PARTS

Parts Revenue at least 24% of Total Sales. Parts fill rate on primary lines over 95%. Achieve at least 5 gross turns. Obsolesence under 10% inventory value. US$35,000 per month parts sales per

employee at 31.5% Gross Profit Margin. Stock order efficiency at least 80-85% by

pieces or 65% by line items.

Strategies, Tactics, Operations for Achieving Dealer Excellence by Walter J. McDonaldOver 600 pages. First Corporate Strategy then Operations including Best Practices by Revenue Center: Parts, Service, Rentals, Used and New Machinery Management. Extensive guidelines for accelerated start-up of new sales rep. How to build a high-performance team including industry specific performance appraisals for technicians, sales reps, administrators and managers. In-depth guidelines on how to manage Key Accounts including building the strategic profile, defining customer roles, mistakes to avoid and how to maximize account sales.

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Service Labor 31. Do you send out a capital equipment

Warranty Expiration Letter?

32. Have you carefully considered why and how to structure and promote a scheduled maintenance (PM) program?

33. Do you track the value of PM Inspections and 2nd Segment Work for labor and parts by inspection, by customer by tech?

34. Do you know the actual labor hours spent on a work order and how it compares to the estimate and the amount charged the customer?

35. Does the shop foreman review paperwork of newer shop employees and make sure that the work time agrees with estimates. Then, does the foreman determine causes of variances from the job estimates?

36. Does the technician look for additional problems that should be handled as a “fix before fail” strategy?

37. Do you always contact the customer by phone and by e-mail if the repair cost is going to be more than 8% above the original estimate or if you are not going to complete the job when promised?

38. Can your sales reps make an outstanding Features-Benefits sales presentation of your dealership’s Product Support capabilities that is used in every sale?

39. Do you have a way to formally monitor and measure customer service satisfaction?

40. Have you identified your top 25% servicepurchasing customers by purchase volume and 25 accounts by aftermarket purchase potential and developed a unique service sales strategy for each account category?

41. Have you built an Aftermarket Key Account Program ( including Managemen Profiles, Contact Strategy, Performance Review, Aftermarket Sales Potential etc.)?

42. Is your service leadership highly skilled in the basic supervisory techniques of goal setting progress reviews, coaching, correcting, and motivating with every manager attending at least one formal supervisory training session each year (e.g., Pryor.com $149.00 seminars)?

43. Do you track weekly productivity, rework, write-downs, plus, billing per week and per month by technician?

44. Do you review Rework with the technician to determine if the Cause was Improper Tooling, Poor Workmanship or Inadequate training and take appropriate action?

Benchmark Performance Standards:SERVICE LABOR Service Labor Revenue at least 24% dealer

sales. Achieve Recovery Rate of at least 75%.

Recovery Rate = Total Hours Billed or Sold

Total Hours Paid Maintain Technician Productivity of 90%.

Productivity = Hours Billed Total Hours Available

Dealer Problem-Solving Handbook By Walter J. McDonaldHow to best approach and solve dealer problems. 190 common dealer snags are examined with possible solutions, referenced in Vols. 1 and 2. Special Reports on Controlling Obsolete Inventory and Vendor Relationships. Comprehensive Project Planning Worksheets. Much more.

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Rentals 45. Have you carefully evaluated if you should

be in Rent-to-Rent or, Rent-to-Sell and/oroffer Rental Purchase Options?

46. Have you completed a comprehensive rental customer profile for each account including key contacts, requirements, financial issues, special needs, plus strategy to obtain/keep the account?

47. Do you have an iron-clad cost capture and control procedure for ALL costs incurred by each unit in your rental fleet?

48. Do you closely monitor rental unit location, agreed-upon maintenance and application to ensure proper care of your rental asset?

49. Do you have a firm procedure for check-in, check-out for abuse, accidental damage (with supporting photo), safety, etc.?

Benchmark Performance Standards: RENTALS Rental Revenue is at least 15% dealer sales Short Term monthly Rental Rates at least

10% of acquisition cost; Maintenance under 20% of Rental

Revenue, excluding customer abuse. Unit utilization over 75%. Dollar utilization over 75%. Short-Term Rental Revenue Multiple at

least 54%. Total Annual Rental Revenue = 60% Original Unit Total Acquisition Cost

[60%=Excellent, 48%=Fair, 35%=Poor]

Used Machinery50. Do you have a formal program to develop

niche markets for used equipment sales?

51. Do you deduct required reconditioning cost from the appraised wholesale value to determine the "purchase price" of the trade from the customer?

52. Do you ensure that "over-allowances" on new equipment sales don't distort profitability of your used equipment business operations? (e.g., have a budget in new equipment department for discounts and over-allowances on trades.)

53. Do you maintain a "90 days and out" policy to keep equipment inventory turning?

25 Profit-Building Tools for Machinery Dealers By Walter J. McDonaldRecommended policies and procedures to increase Gross Profit Margin, decrease Cost of Sales, reduce Expenses, and increase more profitable Sales Volume in each Revenue Center. Our dealer survey reports on what is working to improve field service technician productivity and 2nd segment sales. Special emphasis on value-added Information Technology tools with suggested report formats used by highly profitable dealers. Informative section on affordable AI (Artificial Intelligence) dealer applications to better manage customer needs and expectations, strengthen retention and generate more qualified sales leads across all Revenue Centers. New insights on how to dramatically improve field sales produc-tivity. Special Report on the “Importance of Achieving Dealer 20% RONA.”

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54. Do you make the "disposition decision" on the trade before it is purchased and brought into your inventory?

55. Do you have a firm reconditioning policy and procedure to prevent "overbuilding" used equipment units in the shop?

Benchmark Performance Standards: USED MACHINERY

Used Equipment revenue is at least 7% dealer sales.

Maintain a sales ratio of 80% retail to 20% wholesale to protect margins.

Gross Profit margins at least 30-35% on retail and 5-8% on wholesale sales.

“Purchase” to “trade” ratio 50/50. Achieving at least 4 used equipment

inventory turns. Maintain a strict monthly used equipment

write down policy for units over 90 days old.

New Machinery 56. Do you calculate and monitor market

potential and market share by market segment, region and territory?

57. Have you conducted periodic market surveys to determine which competitive users would be most responsive to your product support capabilities and resources as a way to “back door” these accounts?

58. Do you utilize a PC-based contact management and follow-up control system such as SalesForce or ACT CRM to help manage territory coverage?

59. Are your field sales territories organized around "customer support teams" of field sales reps, customer care reps and field service technicians who meet at least monthly to discuss customer issues?

60. Are you tracking sales activity on a monthly basis: number of contacts, number of accounts profiled, number of new leads, qualified demos, deals proposed, deals closed, number of referrals?

61. Do you maintain key account profiles of your top 25-35 customers overall, describing important contacts, their preferences, fears, financial needs, trading cycle, machine application, major concerns?

62. Do you track fleet customer units on Excel to indicate projected chronological replacement date and set a follow-up date to initiate working on the deal?

63. Do your sales reps always introduce new prospects to the service and parts

department managers in person, telling the customer interesting facts about the capabilities and resources of each area?

64. Do you collect and publish installation reports on customer applications and solutions utilizing your machinery and product support services?

65. Do you have a monthly newsletter or highlighting your product support capabilities, resources and specials?

66. Is there an organized program for monitoring individual performance on presentations of knowledge components of the job and demonstrations of skills?

Free with Purchase of 4-Volume Book Set:

67. Are you training your sales reps to accurately diagnose the wants and needs of prospects or, are they jumping in with knee-jerk recommendations based on superficial knowledge: or, do they just “show up and throw up”?

68. Do your sales reps know how to identify the criteria the prospect will use to judge whether or not he thinks your product support and overall distributor resources are satisfactory solutions to his needs?

69. Do you spend more time training and counseling in the early stages of account development strategy rather than fire-fighting and parachuting in on deals at the back end?

70. Are you training your sales reps on effective ways to determine if the prospect has the “authority to make the buying decision,” early in the deal sales cycle?

71. Do you utilize skill-based assessments to customize sales rep training, focusing on consulting relationships and customer problem-solving techniques?

72. Do you work with each of your sales reps to help them understand that they are the cause of many of their time management problems? And, are you working with them to solve these problems?

73. Have you removed the administrative or support obstacles that prevent your 60 unit per year rep from selling more? (e.g., demo support, sales admin., proposal assistance, CRM follow-up system.)

74. Is your sales training program focusing on improving sales rep deal visibility or awareness” as well as “closure rate” skill sets on an individual sales rep basis?

75. Do you require a formal “walk around” Feature-Benefits demonstration and, a

fleet management cost savings sales presentation from each sales rep at least monthly?

76. Do you have a way of determining if sales reps are actually implementing on the job what they learned in training and do you hold sales management responsible for making this happen?

77. As Sales Manager, have you been able to change your thinking from developing accounts to developing people?

78. As Sales Manager, have you been able to move from being a “star player” to a coach who must develop the sales team through planning, strategy, leadership, supervision, training, coaching and control?

79.Have you been able to gain control of your time so you can effectively move from selling accounts to the more complex and diverse role of Sales Manager?

80. Am you training sales reps not to be an alligator: small eyes, small ears, big mouth?

Benchmark Performance Standards: NEW MACHINERY SALES

Each dealer sales rep must achieve Sales Velocity of at least 200 “Customer Touches” per month (11 per day) including personal visits, telephone calls, emails, and postal mail.

Thank you for taking the time to review my list of “80 Secrets.” I trust you were able to identify two or three opportunities for improvement that make sense for your business.

The texts illustrated in this article are on sale now on our website:

https://mcdonaldgroupinc.com/masters-program

You will also receive my Comprehensive Self-Study Course with extensive private coaching support FREE with purchase of the four-volume set.

NOTE: If you would like a free copy of our Key Account Profile Worksheet or a new one-page graphic illustrating inputs to Dealer Absorption Rate just send me your email address.

Stay safe. Stay strong. Stay healthy.Walter McDonald

Walt@McDonaldGroupinc.com