Happy New Year! I always thought New Year was about being new. In this case, 2018 is over and it is time to welcome 2019. If 2018 wasn’t good for you, the New Year gives you a chance to refresh your life, your business, or both.
I talk with a lot of dealers. And the best part for me is that you don’t know I am A.D. So always be careful what you say to me. If I think it is newsworthy, you might end up reading about it in this column.
Many of you said 2018 was a very different kind of year. Late start isn’t different – lately it has become the norm. Dry summer. Nope, that is also par for the course. However, the third quarter was by far the best quarter for many dealers. Late summer rains and cooler conditions allowed for many to mow longer, cut wood longer, and do other things longer.
That was the old, now let’s talk about the new. If you thought 2018 was different, wait for 2019. Making America Great Again (as President Trump has said he will do) includes correcting the trade deficit with many countries, such as China. Tariffs have either already gone into effect or are about ready to. For example, if all manufacturers do this correctly, there may not be any more $999 tractors. That isn’t a bad thing, either. By getting the dollars up, and making the same margin, the gross margin dollars will be more. And now, a math lesson to prove my point: A $999 tractor might cost you $875. If you sell it for $999, your gross margin dollars (GMD) are $124. By imposing new tariffs on China, that tractor could rise to $1,332. That is $333 more retail dollars. With tariffs imposed, that same tractor costs you up to $1,166. However, your gross margin dollars are now $166. Is it a lot? Not really, but it is something. Higher prices will mean higher GMD.
Will your customers pay the higher price for a new riding mower, or will they have their older machine repaired? How people respond to that question will determine what money you will make in 2019. If you sell more parts and have more service work, it is a good thing. But as you saw from the math I did, selling higher-priced equipment will also be a good thing.
As dealers, what would you want the manufacturer to do with pricing if the tariffs go away? Do you want the prices to stay higher so you can make more money, or do you want them to go back where they were? My personal opinion would be to keep them higher. With prices so low, getting a margin improvement is nearly impossible. If you keep the prices high, maybe, just maybe, you might lose a few sales. But if all tractor manufacturers keep the prices higher, it will be good for everyone.
With all that said, here is my pitch to suggest you be ready for the onslaught of parts and service customers. DO NOT, I repeat, DO NOT give them a reason to get their part from Amazon. As in previous articles, we talk about having parts in stock when the customer comes in to buy them. I’m not talking about repair parts for your service guys; you can hide that wait in the actual repair. I am talking about Mr. America who fixes everything watching YouTube.
What about offering small engine training classes for your customer? I hear you all saying, “Why would I want to do that A.D.? I would be giving away my business.” Here is why. Your customers are already learning how to change their oil on YouTube. By you teaching them how to change the oil, you get to expose them to other items you sell. You can charge $60 for the class, and give them a maintenance kit for their engine as a parting gift (but they actually paid for it with the registration fee). You also use blade holders from the aftermarket company you represent, and sell that too! Heck, by the end of the 20-minute class, you may make $100. That is $100 each person you train. You don’t ever need to teach them the hard stuff, just the stuff they may be getting online. (Come on, go ahead and say it – “A.D. you may be on to something.” Remember, that is on “to” something and not “on” something!)
Here is to wishing you and your business a very Happy New Year. Remember to keep your blades and mind sharp. You can contact me by e-mailing to OPEMAGAD@gmail.com or you can tweet me at @OPEMAGAD, but I have no clue what to do when it arrives!