Farm equipment dealerships seem to have largely adjusted their business practices to the forced realities of the last several months. Talking with precision dealers throughout North America, and overseas, the consensus is that they’ve accepted the changes to communicating with customers, sourcing parts and collaborating with employees.
As soothing as this spring may have been for many dealerships and their farm customers, the unknown of what will follow lingers, in terms of the growing season and the short- and long-term business outlook.
So what kind of climate can we expect in the next 6, 12 or even 18 months? Chances are, it will be more similar to what we are experiencing today than what we did a year ago.
Arlin Sorensen, founder of HTS Ag, an independent precision farming dealership in Harlan, Iowa, suggests aspects of how dealerships do business and operate will be forever changed — in some cases for the better.
“Change is going to be survival,” he says. “Two months ago, how many companies would have never thought they’d be able to run an efficient business with employees working from home?
Today, they’re seeing that it can run pretty well and I think even within dealerships, we’ll see some rethinking of workforces and how services are delivered and where they are delivered from.”
Businesses have and will likely continue make some changes financially throughout the upcoming months. Sorensen offers 10 experience-based pieces of advice to keep your precision business focused, yet fluid.
1. Know your numbers.
Keep your accounting entries up to date and stay on top of where you are. If you’re normally a ‘do it when I have to for tax filing’ kind of person, change that behavior and enter things now so you have facts on your financial status.
2. Use a budget.
Sorensen suggests a budget with at least two columns — one for the expected and one for worst case (maybe 20-30% less). Compare your real financial info to the budget at least monthly but more often is better. Any good accounting package will let you compare current to budget. You need to see when you’re deviating from the plan.
3. Conserve cash.
Cash is king — always — so look at your expenses and see if there are things that should be temporarily ended or deferred. A report you should track is ‘free cash flow’ which is the amount of cash available to do business.
4. Talk with your experts.
Now is the time to discuss the potential of a longer term financial slowdown, or even recession with trusted financial advisors. Preparation is essential.
5. Have a bank line of credit in place.
Banks loan money to people who can prove they can repay it, so don’t wait until there is a need to get a LOC set up.
6. Stay close to clients.
They will face the same challenges you do, so connect and assure them you will be there to help them through the chaos. Find ways to bless them from afar but lets them know you are in the boat with them and thinking of them.
7. Over communicate with your team.
Everyone is facing a new normal and the more we can communicate the facts and details needed to serve clients, the more effective our team will be and more empowered they will act.
8. EBITDA and the balance sheet matter.
Don’t lose sight of the reality that you have to stay in business to be able to pay your team and serve your clients. There will likely be concessions that need to be made to help others, but you have to keep perspective on the truth that bankruptcy helps no one. Care, help but don’t go overboard and destroy your own company in the process.
9. Pay close attention to the sales pipeline.
Things will be disrupted and likely pushed forward, so stay on top of where deals are and make sure they don’t drop off but are continually moved toward a close.
10. Evaluate your people.
No one likes to consider downsizing during a difficult period. But if it comes down to reducing your team or losing the business, there is a clear choice to be made. Create a RIF list (reduction in force) before it is needed so emotion and personal feelings don’t get in the way of making the best decision if it comes to that.
Sorensen also sees the precision transactional model evolving, as customers get more comfortable with making equipment purchases online. He cites the time when consumers were skeptical about buying cars online, but as the market matured, it’s become an acceptable, efficient way of completing a transaction.
“There’s a lot less cost involved, and we’ve all learned how powerful a tool virtual meetings can be,” he says. “I wonder if ultimately, we’ll continue to see salespeople driving all over the countryside to make sales calls when they can target those appointments without ever leaving the office.”
Get More Thought Leadership
Hear more from Arlin Sorensen in part of Farm Equipment’s ‘Thought Leader’ video series
In this 30-minute video interview you’ll get Sorensen’s perspective on some unique non-ag service opportunities dealers can consider with their precision business, along with a few leadership do’s and don’ts to help navigate through an uncertain business climate.
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