As precision farming develops, it is becoming increasingly complex. Hardware is no longer the only avenue for dealers to build and sustain their business. As dealers branch out into areas like precision service plans, data management and even unmanned aerial vehicles (UAVs), certain pitfalls loom that can curtail the success of a dealership.
Tim Norris, CEO of Ag Info Tech, a precision farming dealership in Mount Vernon, Ohio, has seen the good, the bad and the ugly with more than 18 years of experience selling, supporting and servicing precision technology. From the consequences of not calibrating yield monitors, to selecting the right delivery method for data management services, Norris understands that precision farming is an evolving business that requires a progressive approach by dealers to maximize long-term profitability.
He offers his top 10 do’s and don’ts for dealers when selling and setting up hardware and services, learned through personal experiences. These include best practices for developing and delivering data management service offerings, considerations for being the “right dealer” for your customers and getting an edge on the competition.
10) Offer Financing With Quotes
Ag Info Tech offers financing with every quote that goes out and Norris says it’s vital to a sale. If the customer doesn’t want to go ahead with that sale and the dealer brings financing up afterward, it’s like telling the customer that you think money is the problem, Norris says. This has the potential to embarrass the customer.
"Dealers need to strive for a total margin over 25% to be profitable in our business..." - Tim Norris, CEO of Ag Info Tech (Photo courtesy of Ag Info Tech)
“By not offering financing up front, you could be excluding yourself from a sale,” he says. “We’ve found that including financing on the quote early as an option definitely includes us in some sales that maybe we wouldn’t have had.”
9) Harness Web Potential
The Web is a great tool for a dealer’s precision business, but Norris warns that it has to be managed. He says websites need to be fresh and need to supply key information in order for them to be useful for dealers and customers. Make sure the site is easy to navigate, and customers should easily be able to find the dealership phone number and location.
Facebook and YouTube, in addition to a robust website, are great tools to connect with customers. But again, they need to be kept updated and fresh for them to be effective, Norris says.
“The Web is a tool that can be used for much more than just advertising,” he adds. Norris and his team have developed a Web-based dealership management tool called AgriVault. The site allows them to track quotes, orders, pick lists and invoices and store their customers’ data.
“We also use it to enter and track our service issues,” he says. “This helps us track more billable time as well as compiling a database of issues and how they were resolved.”
Because the Web can be an untapped resource, Norris recommends dealers hire someone to help build the website they want and make sure everyone involved has a clear understanding of the scope of the project.
“Web design is addictive and you will want more and more features, so be prepared,” he says, “and get a good estimate of what it can cost.”
8) Sell on ROI, Not Price
Making return on investment (ROI) the focus of a sales pitch, rather than allowing the customer to fixate on the price of the item, helps take price out of the equation. Norris does this through ROI calculators, which he’s built for different products and services his dealership offers. These calculators are backed by data that they’ve gotten from their customers.
“The ROI calculators give our salespeople a great tool to show the customer the kind of payback they can expect,” Norris says. “I don’t want to sell a customer something where they will not receive payback. I want them to make money and be satisfied with our products.”
After all, a satisfied customer is more likely to think of your dealership first when the time comes for them to purchase their next precision implement or service plan.
7) Track Your Hours
“There’s an old adage that says, ‘If you can track it, you can manage it,’” says Norris.
If dealers are having a problem with a product, tracking the amount of time they put into trying to solve that problem will give them documented proof to take back to the manufacturer. This lets them see that the problem is a serious issue.
“Hopefully, with your tracked time, the manufacturer won’t have to duplicate some of the work you’ve done to get the problem figured out,” Norris says.
“Tracking your hours can also help you bill some of the time that may have slipped through the cracks.”
6) Be a Multi-Tasker
Norris recommends finding complementary lines to keep your business from being single-task focused. “Our business is so seasonal,” he says. “If you are single-task focused, and you gear up with enough manpower for spring and fall, what do you do with everyone in the off season?”
Complementary lines should offset the busy season and extend specialists’ time spent working in the field. Dealerships need to figure out when their busiest times are and then find product lines that are used year-long, or are used most during gaps in their dealership’s busiest times, Norris says.
For example, Ag Info Tech began with the single focus of soil sampling, which has peak busy times in the spring and fall. We added grain bin monitoring to keep the company busy during their otherwise slower winter and summer months.
“You can either install grain bin systems when they’re full, before they’ve taken the first load of grain out, or when they’re empty,” he says. “So those time frames usually match up to late November through February, when the grain bins are full and June when they’re empty.”
Tile plows and grade control systems also are useful lines for spreading out work. “After harvest is done, people are out there installing tile until that ground freezes,” he says. “And then in spring, as soon as the frost starts to get out of the ground, they’re back in there and utilizing those tile plows and installing tiles.
“Tile plows really extend our specialists’ time in the field and help keep us a little busier.”
5) Don’t Hire a Clone
“I really think most precision farming dealers struggle with hiring good, qualified people,” Norris says. “A lot of times when we hire people, most of us tend to gravitate to people we think will act like we do.”
However, everyone has their strengths and weaknesses, and hiring people who are right for the job, not just right for a dealer’s personality, will ultimately benefit the business.
“Try to hire a person whose strengths complement your weaknesses,” he says.
Norris believes this is especially important if there are only a few employees working at a dealership. Some people are better suited for one kind of customer or task than others and it’s important to have an even mix to make the team the most effective for the widest range of applications and customer needs.
Hiring people whose strengths complement a dealer’s weaknesses may sound perfect in theory, but Norris warns that it’s not always so easy in practice.
“Managing people who think differently than you comes with its challenges,” he says. “I’m always in a hurry and I’m not good at details, so when I have an employee who takes longer at installing things, I struggle a lot with why it’s taking so long.
“But, when you go out and look at how well they have hidden the cables and protected them, you realize that they’ve taken the time to do it right. Rather than hurry them up and turn them into another ‘me’, I need to take the time to figure out what it really costs to install something the right way.”
4) Maintain Your Margins
Norris says that as a farmer, he always thought 10-15% was an honest margin. While farm equipment dealers can get by with less than a 10% margin, precision farming dealers don’t typically get any help from a manufacturer if there’s a warranty problem, and therefore need to maintain a higher margin. He says that precision farming dealers need to strive for a total margin over 25%.
When salespeople ask to give a 5% discount on a product, Norris warns, “Unless you’re making at least 25% on that product, after that 5% comes off, don’t do it because 25% seems to be the key number of what we have to have to actually be profitable in our business.”
For example, if a company has sales of $3 million, 25% margin is going to be $750,000. If the company has expenses of around $550,000, that leaves them with a profit of $200,000. If they lower the margin by even 5%, they go from a profit of $200,000 to a profit of $50,000.
3) Sell Service, Not Just Hardware
Dealerships shouldn’t stop selling hardware, Norris says, but they need to also sell services. They can sell the installation of a product and can put a price on setting up monitors. Dealers can also sell data plans that include collecting customer data from their displays, printing reports and analyzing data, or create variable-rate technology (VRT) prescriptions from their data.
“There’s a lot of little things that you can do that are high profit add-ons,” Norris says. “Like adding complementary product lines, selling service can help your business during times when hardware sales are down or simply less busy. Service allows dealerships to build and maintain relationships with customers outside of hardware sales.”
2) Don’t Undervalue Your Service
Until he started crunching the numbers, Norris says he never realized how much employees really cost to have in the field per work hour. For example, a $15 per hour employee really costs closer to $90 per hour when he considered taxes, time off and how much of his employee’s time is actually being billed to the customer.
“Paying a technician $15 per hour, 40 hours a week, for 52 weeks in a year comes to $31,200. Then you have to add taxes, insurance, 401K, worker’s comp., uniforms, which drive the cost of an employee up to 40% of the wage,” Norris explains.
“Taking 40% of $31,200 is $12,480 added on to the cost of the employee, for a total of $43,680. You then have to consider miscellaneous expenses like the employee’s truck, fuel, computer and phone, which are about $12,705, for a total cost of $56,385. If you include the 7 paid holidays in a year, about 2 weeks of vacation, 3 paid sick days and 5 days of training, you’re left with 1,880 possible hours to bill per employee. When you divide the $56,385 by 1,880, you have a cost of $39.98 for the employee per hour.
“Next, you have to consider that you probably aren’t billing 100% of your technicians’ time,” Norris continues. “If you only bill 75% of a technician’s work hours, the cost of the employee goes up to $59.99. At Ag Info Tech, we only bill about 32% of our billable hours for service techs, which brings the cost per service technician to about $93.72 per hour.
“We only charge $65 per hour for service work, so it’s costing the company $28.72 per hour on service jobs.”
The key, Norris says, is to do the math and see how much employees really cost, then get the percent of hours billed as close to 100% as possible, and raise service prices to more accurately charge for what the cost of the work is.
1) Be Willing to Change
“Too often I see dealers getting complacent with doing things that they’ve always done,” Norris says. It becomes especially difficult to take the next step as dealers begin to hire people who are more task-oriented and have trouble seeing the big picture.
“We need them to do routine work and do it right, but as managers we need to share our vision and we need to relieve their fear of change because sometimes the task-oriented person really doesn’t like to change, to learn new lines or management systems” he says.
Norris says it’s one thing to have the vision for change, and a very different thing to be able to share that vision and convince people to believe in the vision. However, change is essential, especially in the precision farming industry, where the things dealers sell today will be entirely different than the things they will sell 5 years from now.
Sometimes change can mean needing to switch suppliers, which Norris admits can be very tough. He stresses that to make a transition to a new supplier smoother, a dealership needs to develop and sell its own brand.
“The dealership needs to have an identity as well,” he says. “This is always something to keep in mind.”