Financial Fitness

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Financial Fitness

This is a business model based simulator that we have developed over the past forty five years working with more than one thousand dealerships, of all major brands and most secondary brands, worldwide.

We provide the basic input forms on our website on the internet and you provide your information. We will hold all of this input information confidential. We will analyze your information against our management measures and standards that we have developed over our consulting career.

We are using six levels of performance in the reporting for each of the management measures. The range of measure covers five departments; sales, rentals, parts, service and administration. We review each department in four sections; revenue, finance, operations and assets. We will have a range of management measures from three per group to over six. There will be a range of nearly two hundred measures to select from in the Financial Fitness Model.

We will use six levels of performance in the reporting for each of the management measures. The lowest is represented by a “Red Cross” which is a “triage” level. Then comes the “Red Light” which means stop this now. Next is the road “Caution” sign. Standard Performance is represented by a “Green Light.”  High performance is represented by a “Gold Star.” Performance that is too high is represented by a “Frown Face.

We will take your input and provide you a sample of the Fitness Model with a selection of measures. This will be complimentary. Then we will provide a series of four choices of our service. Basic, a selection of three to five measures for each department – 15 to 25 measures for each  store. Standard which will be three measures for each section within each department – 60 different measures. To the Special and ultimate levels which will be dealer selected. The Ultimate will have a minimum of 100 measures for each dealer location.

We are currently working on the creation of a series of TIPS (Typical Improvement Options). The TIPS are those steps we have used in our consulting work. The use of TIPS would reduce the need for on site consulting work which will save you money. There will be three to five TIPS for each measures. Each TIP will have a “How To” document provided which will outline the steps and actions to take on this measure to improve the results.

If the TIPS option is not sufficient for the dealer then we are developing a network of “ACES” (Associated Contact Experts). These ACES will be made available on a consulting basis to assist the dealer in making the necessary improvements in their operations.

We are very pleased with the development of this new option for dealers. Our goal continues to be that we help everyone move to a best practices level of performance.

The time is now

The New Reality

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To properly address the New Reality we have to look backwards. From the 1960’s to 1980 management felt pretty good about things. Sales revenues had increased, profits were up, life was good. We thoguht we must be the greatest generation of business managers ever. But it was all inflation.

When Paul Volcker and the Federal Reserve raised interest rates to kill inflation there was a serious adjustment. Businesses reinvented themselves. Operating metrics became all the rage and we developed business models for everything.

Well in a few years we felt pretty good again. With a couple of exceptions sales went up and profits went up and things were good again. But it was all leverage. With George W Bush at the helm we witnessed some of the most severe disruptions in our lifetimes. But we had to lick leverage and he and his Treasury Secretary Hank Paulson started to get it done.

In 1980 for every dollar of US GDP there was $3.70 of debt. By 2005 that debt had grown to $30.00 (The Trillion Dollar Meltdown). I shudder to think what it is today with our deficits and spending seemingly totally out of control. We are clearly in a new era when the Federal Reserve keeps printiing money and the currency continues to be debased. We have to reinvent our businesses again. We have to repair balance sheets and we have seen that happening. For everyone BUT the goverenments, all governments. Don’t forget I live in California and we make Greece look good.

We have seen encouraging signs in the equipment world. Equipment sales have been up dramatically – 30%+ to 40%+ for two years in a row. But we still have a big hill to climb to get back to the previous peak. This is not going to change for a long, long time – that is the new reality. You will survive and perhaps thrive IF your focus is on Parts and Service and for some of you Rentals. If you don’t have that focus….there is a significant risk to you. The time is now.

Updating the Add to stock blog from yesterday

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Yesterday we had difficulty in format for the table of probabilities. With this update we hope we can clear up any misunderstandings. The first column is the time between the last two calls of a part number. The second column is the probability of a sale in the coming twelve month period of time.

  • Time between Calls        Probability of 1 Call
  • 3 Mths                                  98%
  • 4 Mths                                  95%
  • 5 Mths                                  91%
  • 6 Mths                                  87%
  • 7 Mths                                  82%
  • 8 Mths                                  78%
  • 9 Mths                                  74%
  • 10 Mths                                70%
  • 11 Mths                                66%
  • 12 Mths                                64%
  • 15 Mths                                56%
  • 18 Mths                                49%

The above percentages represent the probability of AT LEAST one call in the coming twelve months. This should give you more help in determining when to add a part to stock. The time is now.

Facts are awfully stubborn things

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This is a most interesting time, isn’t it? I listened to Jimmy Rogers on CNBC the other night. He was pointing out there is an election this year in the United States, there is one in France. Germany has an election next year. In fact there are 40 governments that will face elections this year. There will be a lot of money spent by the politicians. Yes, they spend our money to get themselves reelected. Sorry to be so cynical.

But 2012 is going to be a good year – one way or another. If we have to show unemployment going down well let’s not look so closely at the shrinking size of the work force;  If the deficits get too large let’s blame it on the recession or the conflicting arguments between one view of the economist Keynes and the rigors of the Austrian school followed by the later Milton Friedman. Politicians will be in the feel good best this political season

The total unit sales in the United States are still less than 50% of what they were at their peak. The customer fleets and rental houses are almost at the complement of units now. So where is the boom going to be coming from in the US? It sure won’t be housing will it? And as long as housing operated with depressed prices the pent up work force movement will not be released.

The only answer is that the market is what the market is and get over it. Get one with it and make the best of it. The happiest people normally DON’T HAVE the best of everything but they do MAKE THE BEST of everything. The time is now.

Maintenance

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Over the years more and more people have realized that maintenance on a piece of capital equipment is one of the more critical activities to conduct to reduce the owning and operating costs of that piece of equipment. This is true for your vehicle or washing machine just as much as for your machine.

There was a sudden recognition some time ago that the “customer” didn’t really appreciate how important maintenance was in extending the useful life of that machine. They felt, in many cases, that maintenance was simply dropping fluids and changing filters. As most of you know it is far more than that. Along with this recognition the various suppliers started to make it easy for the customer to maintain their machinery. They sold maintenance agreements and extended warranties offering the customer piece of mind and a reasonable price. But there still remained one serious stumbling block – Service Management.

Yes, in many cases, the Service Managers are in the way. You see they are very busy people. They don’t have enough people in their organization to support the current service workload. This service organization is a subject of one of our webinars next week. Check at www.rjslee.com under the learning tab for more information.

I am struck by the fact that everyone knows how to run a parts department or a service department except of course the people that actually do run the parts departments and service departments. This is one of the major challenges facing management in equipment dealers. How do we get professional management into parts and service when we don’t have sufficient respect for the work that is being done in these departments?

A new discussion on market share

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Al Wiley, an executive of Xpectmor, sent us a comment on our recent Market Share post. He says that “market share is the definitive measure of customer satisfaction.” Of course he is right. The measure of market share, however,  is what causes the dilemma for many of us.

In the equipment market it is reasonably easy to define market share. There are a finite number of transactions and everyone knows what everyone got. For instance, we have five different suppliers in the market with sales last month. Supplier #1 got 4 sales, supplier #2 got 1 sale, supplier #3got 2 sales, supplier #4 got 2 sales and supplier #5 got 1 sale. The market share is a simple matter of arithmetic. Supplier #1 got 40% market share and so on.

With the parts and service business it gets more complicated. The various suppliers into the market don’t know what the other suppliers sold during any particular period. So how can we possibly calculate the market share of any particular supplier? That is why there has not been any real definitive publication for market share.

When I first started in the Industry in the late 1960’s some suppliers used to conduct a personal survey with each and every one of their customers worldwide. Can you imagine the time and cost for such a survey? Well they did them and they published the results within their distribution network. It was not precisely accurate but it was a very good indicator of where you stood as a dealer in parts and service market share.

As more and more machines get GPS equipped and the dealers/distributors, manufacturers and customers become more adept at understanding telematics and their use we have a terrific opportunity. We can calculate what the consumption of parts and service “should” be on a machine.

This is the first problem. The customer doesn’t always follow the recommendations of the manufacturer of the machine for the maintenance intervals nor the maintenance items to be dealt with for a particular service. Similarly when it is obvious that a repair should be made with a “new component” sometimes a repair that I call “bubble gum and band aids” will be performed. You might be wondering why this is important. Well it is due to the fact that all we can do is calculate the “potential” consumption of parts and service for a particular machine in a specific application running a specific number of hours. It is this potential that we have to use to calculate our “market capture” rate. See now we change the word. It is no longer market share it is market capture.

The dealer captures the potential business based on their actual sales of parts and service. Once we have these facts nad have them for a sufficient period of time we can make a clear statement about capture rates are the success and/or failure of the particular strategy that a dealer is following. The time is now.
 

 

 

 

Are employees looking around today?

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December was the first month in many years that had more people quitting their jobs than being laid off or fired. Is this the beginning of musical chairs with employees? Is the labor market now strong enough to absorb all the employees that feel they were hard done by over the past three or four years by their employers?

What should employers do to keep their employees satisfied and happy and stimulated in their work to retain them as employees?