Upturn or Recession?

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Upturn or Recession?

Guest writers Steve Clegg and Debbie Frakes are writing for us this week about the ways in which our accurate forecasts can help us plan for real growth in “Upturn or Recession?”

The equipment industry is cyclical and seasonal. Many dealerships react to events by looking backward at accounting financial statements, explaining why they are victims of current market conditions. But the most successful dealerships always look forward by forecasting and planning for the future. As a result, they can take advantage of both upturns and downturns.

There are effective Artificial Intelligence (AI) models that can be used to forecast and create a business plan, based on these forecasts. During an upturn, you can expect shortages of parts, equipment, and employees, as we have recently experienced. The best approach to maximizing profits is to focus on the customers and industries with the highest retention rates where the best service can be provided to generate a healthy gross margin and a high return on capital. This process builds cash and liquidity and strengthens the balance sheet in anticipation of opportunities during a downturn.

It is important not to chase the upturn, although OEMs and banks are often eager to encourage that approach to accelerate their own growth. A sustainable growth rate for your own facilities, employees, balance sheet, and customer retention, however, places limits on rapid growth. Most dealers cannot sustain a growth rate in customers and transactions greater than 10% to 15% per year, regardless of the opportunities. The requirements for new customers, employees, systems, facilities, training, and capital are beyond their internal capacity to grow and keep their existing customers happy. Using AI Analytics, you can see forecasts with >95% accuracy for the next 12 months for your business, by branch and department, providing the number of customers, transactions, and revenue that can be expected. With AI forecasts you can anticipate exactly what to expect for your customer retention, customer engagement, and even ROI on your sales and marketing programs. This approach allows better accuracy in planning the future and anticipating the best ways to identify opportunities.

During a downturn, successful dealers forecast, then use their strong balance sheets and cash flow to purchase parts and equipment at steep discounts from their suppliers and competition. They also hire the best employees, pick up additional equipment lines and territories, and acquire assets from competitors that have failed. With this approach they create the foundation for real growth during the next upturn. A 1% improvement in customer retention usually generates a 12% annual transaction growth rate. There is less vulnerability to economic downturns when customer retention is strong. Historically, there is only a 7% to 15% reduction in transactions over a 12-18 month period during a downturn, so the improved retention easily offsets this reduction. 

There are five steps management you can take now to ensure your company can weather any type of economic cycle. 

  • Create a forecast the next 12 months, based on your current performance, and continue to forecast by updating your results with the prior month’s revenue. With this approach your organization will have a clear picture of what will happen for the next 12 months, if you continue to operate as you have been. 

A platform that is easy to use to produce accurate forecasts is Zintoro.com. Its AI Analytics program provides automated forecasts for customers and transactions, including the resulting gross margin and revenue, by company, branch, and department with a >95% confidence level.

  •  Use the 12-month forecast to create a plan that will maximize revenue and profits

Actions for improvements are steps that you plan to begin during the next 12 months to assure you will meet or exceed the forecast, which is your benchmark. 

An action plan for an upturn provides the steps to take to overcome hurdles that are typical during an upturn, such as available working capital, delayed parts and equipment deliveries, dissatisfied customers, increased costs, and accommodating increased order frequency for parts and service with a backup plan to prevent overwhelming your employees and facilities. 

An action plan for a downturn provides the steps necessary to take advantage of the next downturn. 

  • Identify the customers that are not profitable and take steps to reduce interactions with them.
  • Determine opportunities to automate wherever possible, from equipment and customer communications to operating systems. 
  • Build cash and set up processes to generate a high return on capital employed.

A recession presents a set of severe financial hurdles that typically include: reduction in available capital, delayed customer payments, drop in equipment sales, decrease in rental utilization, and reduced frequency for parts and service orders. 

Rank the ways to cut costs, using the improvement of employee support for your customers as the primary driver. This ranking should answer these questions: 

  • What is essential to keep the doors open and assure that stable customers are engaged? 
  • Where to invest to acquire and retain stable customers, by market and industry?
  • Where to invest to hire and retain the best employees?
  • Where to invest in equipment, technology, and facilities at favorable prices?
  • How to keep all other costs as lean as possible? 
  • Where to automate and outsource? 

 Keep shareholders, lenders, suppliers, and employees informed.

Zintoro.com provides reports for actual results and forecasts to manage expectations and keep these groups focused on the key drivers for customer retention, customer engagement, and opportunities for improvement. Revenues and profits result from customer retention and engagement.  

  • Maximize cash and profits.

Implement the following actions quickly to maximize cash on hand and focus on generating additional cash to build and maintain your cash cushion. 

  • Monitor the cash flow weekly with a system to show actual receipts and disbursements tracked at least weekly and continually update the cash forecast for 12 months to anticipates any problem periods.

Obtain debt at favorable fixed rates and establish credit lines to ensure cash availability with reasonable lender covenants. Be aware of their liquidity options. Businesses that line up capital sources before they need funding often receive more favorable terms. Funding sources may include revolving credit lines, owner infusions, alternative financing, and private equity. 

In a downturn, revenue and cash availability always fall faster than expenses. Sources of capital dry up and as inflation accelerates, costs climb faster than you can raise prices, reducing your available cash.   

  • Put together a list of expenses you can reduce to minimize your cash burn rate and identify sources of additional cash and when they may be required. The longest recession in the past fifty years was 18 months; most recessions last less than 12 months. Your goal is to have enough cash, including capital reserves, available to make up the difference between the potential gap in cash flow, so that you can maintain operations for twelve to eighteen months and take advantage of the opportunities that will be presented during such times to build your business. 
  • Manage your supply chain proactively by keeping your suppliers informed with your forecasts and requirements. Anticipate how your customers and suppliers will react when you are projecting your cash requirements. 

In a recession, understanding the financial situation of your customers and suppliers is critical. It’s important to be realistic, not optimistic. Assess customers to identify which ones might slow down their payments or become unable to pay. These customers can double your working capital requirement during a downturn. Meet with your key customers and suppliers to review your forecasts and anticipate their problems by understanding their challenges, too. Negotiate payment plans with suppliers while offering incentives to customers for early payments or bulk orders. 

  1. Evaluate your parts and equipment inventory to reduce capital employed       and increase turns.
  2. Develop a program for recruiting and training employees. Plus, expand ways to retain your employees proactively. 
  3. Track all sales and marketing programs with a return on investment. Cut programs that are not generating a return that you can document.
  4. Forecast and plan, don’t wait and react. Without planning you are put in a position of reacting by quickly cutting spending, firing employees, and putting your equipment inventory and assets out for auction at steep discounts. Reacting rather than plan can destroy your ability to recover during upturn that will follow at some point. 
  5. Track and invest in marketing programs with the highest ROI. Compare spend for customers who were exposed to a marketing activity versus those who were not. For example, if you have an email program in place to alert your customers of specials and services you offer, compare the spend for customers with an email to those who aren’t receiving your emails. Are you calling customers regularly? Compare the spend to those you’re calling to those you haven’t called. What about contacting customer for follow-up surveys? Are the ones you talk to spending more than the ones you haven’t contacted? Below are some comparisons for a dealer over a 12-month period, as an example.

 

Marketing Transactions Revenue Cost ROI times
Program /Customer /Customer /Customer Active Customers
Telephone
    Called         24 $128,440 $28 1231X
    Not called     37 $93,965 $0     – 
Emails
  Emailed               30 $134,270 $35 2378X
  No email                 4 $51,0443 $0     –
Surveys
  Surveyed               16 $82,423 $35 966X
  No survey                 7 $48,616 $0     –

 

Next Steps

Zintoro.com has developed a forecasting program that is updated monthly with your results. Just download the last two years of your invoices, plus invoices from the current year to date, and send them to Zintoro to upload into their password protected portal. They will schedule a call to review where the forecast shows you are headed and what steps you can take to change those numbers. Contact Steve Clegg at csclegg@zintoro.com for additional information.

To get started with marketing programs that you can count on to increase sales and deliver an impressive ROI, contact Debbie Frakes at dfrakes@winsbyinc.com. 

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The Key to Equipment Dealer Marketing: Use the Right Lead Sources

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The Key to Equipment Dealer Marketing: Use the Right Lead Sources

Guest writer Debbie Frakes reviews the importance of generating leads in multiple ways in this week’s blog post, “The Key to Equipment Dealer Marketing: Use the Right Lead Sources.”

The only way for equipment dealers to achieve consistent success is by having a steady stream of new leads coming in through the door. If an equipment dealership doesn’t have that, then your business will slow and eventually cease to be successful. That means you have to find productive, reliable lead sources for your sales reps to focus on. 

The most important lead sources for equipment dealer marketing and sales 

When it comes to determining the best lead sources for your sales reps, the key thing to remember is that it’s not all about new prospects. You also have a wealth of leads for your reps to reach out to from current and past customers. Here are a few of the ones you should focus on to improve your sales and equipment dealer marketing.

Email open reports 

Emails are essential for any marketing strategy, because they remind customers and prospects of all your products and services, and they can encourage them to purchase. When it comes to lead sources, emails are also a very valuable tool. Your sales reps should be reaching out to recipients who have opened and clicked on your emails. They can even tailor their sales message to what the customer or prospect may be interested in, based on which section of the email they clicked.

Last purchase reports 

Last purchase reports are an excellent resource for sales reps to find leads to contact. They should be regularly calling anyone who hasn’t purchased something from you in an average time period for your industry and market. 

Customers from different parts of the dealer business 

Equipment dealers are actually several different businesses rolled up into one. Critical for your success is to link them together and make sure your various departments are sharing leads with one another. For example, if one of your customers comes in for parts, they can become a lead for the service, rental, and equipment sales sides of your operation. Your sales reps should be reaching out and offering to fulfill all of your customers’ needs! 

Your website 

A lead generating website is important for equipment dealer marketing strategy. Your site should make it simple for leads to give you their information, ask you a question, or sign up to receive emails. Once they have the lead’s contact information, a sales rep can then reach out to them, answer any questions they asked, and ask them if all of their equipment needs are currently being fulfilled. 

Lead generation should be a constant activity 

Your business requires new leads, and using the most productive lead sources is the best way to bring them in. At Winsby, we help equipment dealers develop and implement successful lead generation plans using proven strategies. By combining effective emails with professional, easy to use websites, email list verification, calling, and reporting, we can help ensure a steady stream of new business. 

Contact Winsby Today.

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Your Customer Retention Rate Is Your Future Growth

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Your Customer Retention Rate Is Your Future Growth 

Guest writer Debbie Frakes tackles the all-important topic of customer retention in her blog post this week, “Your Customer Retention Rate Is Your Future Growth.” We are often encouraged to attract new customers and can overlook the value of keeping customers for life. At Learning Without Scars, we can’t emphasize this enough. It’s so important to us, we have an entire class on the subject!

Finding new customers is great for business—they help you boost your sales and generate more revenue. However, retaining existing customers is even more important. Machinery dealers know that it is far more expensive to locate new customers than it is to keep the ones they already have. Although we all understand the concept, not all dealers actually use programs designed specifically to keep and develop their customers. 

In this post we’re going to cover the six key retention drivers for growing your business: 

  1. Retain Customers with a Satisfaction Program for continuous improvement 
  2. Customer Internal Referrals more than double transactions each year 
  3. Lead Flow with the right customers in the markets and industries you support 
  4. Convert prospects predictably by selling what they purchase most often and saying “Yes” 
  5. Engage your customers with consistent contact 
  6. Measure and Forecast results

What is a customer retention rate? 

Customer retention refers to the rate at which customers stay with your company for a specific period. The average customer retention of an equipment dealer business is 95.5% per month. Although that may sound very high, what that number actually means is that you are losing 4.5% of your customers each month. Over the entire year, you lose 54% of your customers! 

On average, equipment dealers lose 51% of their customers each year. Only 29% of customers are retained for 3 or more years. Even though it looks like you are retaining most of your customers each month, you’re actually losing more than half of them throughout the entire year. And that pattern just makes business more difficult long term. 

On the other hand, an improvement in your customer retention rate of just 1% each month represents a 12% increase in annual growth. The question is, how can you make that improvement? 

How to boost your customer retention rate: a customer satisfaction survey

One of the best ways to improve your customer retention rate is to conduct customer satisfaction surveys. When they are conducted by a third party, these surveys allow you to learn about your customers and determine any issues before they turn into big problems. It’s important to have them completed by a third party, because customers tend to be more honest about a company if they’re not talking to someone from the company.

A customer satisfaction survey will help you understand your customers’ perspectives, why unhappy ones are unhappy, and how to serve them better. Plus, you’ll impress them by showing how proactive you are. 

Using Winsby’s customer satisfaction survey program, our clients have seen 20% higher retention, 49% more customers, and 123% greater revenue growth over 5 years compared to those who are not using the program. 

Customer internal referrals 

Focusing on customer referrals means making sure your customers are buying everything from you—parts, service, rentals and equipment. Equipment dealers have multiple departments that are almost like different businesses. The good part about that, though, is that a customer can come in for a part, and then they become a potential customer for the service or equipment. The more they purchase from you, the better your customer retention rate will be. 

How can you increase internal referrals? 

  • Understand customers’ expectations— turnaround time for parts and equipment deliveries and service protocols. 
  • Then, you can meet expectations, or manage them if meeting them isn’t possible. 
  • Always call the customer with updates before they contact you.

Ensure you have a consistent lead flow 

Another critical piece of improving your customer retention rate is properly managing your lead flow. Your sales reps need to identify customers at risk consistently, then contact and engage them. At risk customers are current customers that you’re in danger of losing. These are people who start purchasing less and less from you, and eventually they could go to one of your competitors. Customers that are at risk typically haven’t purchased from you in over eight weeks. By reaching out to them, you can encourage them to come back to you to fulfill their needs. 

Engage your customers and convert prospects

You should also be regularly sending out emails to your customers and prospects. In our experience, customers on an email list buy two to three times more often than those who are not receiving marketing emails. By putting your brand, products, and services in front of customers, you’ll stay top of mind and your retention rate will increase. 

First, call customers and prospects to confirm decision makers’ emails to expand your list and keep it current. Then, send emails at least twice a month and show all your capabilities: parts, service, rentals, new and used equipment. It’s also important to identify your website visitors. Distribute leads who engage with your emails or website to your sales reps automatically to reach out to and determine what they need. 

Plus, when you engage with customers, always answer your phone and always say “YES!”. 

Measure and forecast 

It’s important to look at your past to predict your future. When it comes to improving your customer retention rate and achieving consistent growth, you have to have an idea of where you’re at and where you’re headed. At Winsby, we forecast the growth of Active Accounts for the next 12 months, based on patterns during the past 36+ months, by branch and by department. You’ll learn:

  • Expected losses and gains of Customers
  • Expected number of transactions
  • Expected revenue

You can then use the forecast to develop a plan of the action to take to improve your customer retention rate.

Conclusion 

Retaining your existing customers is just as important (if not more important) than gaining new ones. Use all the tools at your disposal: customer satisfaction surveys, internal referrals, email marketing, consistent lead follow up, and always trying to say “yes” to your customers. 

If you want to increase your customer retention rate and take advantage of all your possible tools, then contact Winsby today! We’ll help you implement a plan quickly. Contact Winsby Today.

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Why Customer Satisfaction Surveys Are Important For Equipment Dealers

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Why Customer Satisfaction Surveys Are Important for Equipment Dealers

Our new guest writer, Debbie Frakes, is the Managing Director at Winsby Inc. where she has been helping Business to Business (B2B) companies grow for over fifteen years. What works is constantly evolving, but Winsby is always testing new concepts to determine the most efficient and most cost-effective ways of generating business. Today she shares why customer surveys are important for equipment dealers.

The best way to improve your heavy equipment dealership is to understand what you are currently doing well, what is satisfactory but could use improvement, and what areas need to change in order to retain more customers. The easiest way to gain this information is through customer satisfaction surveys obtained by phone. A phone call assures that they are being thoughtful in their responses, rather than clicking through an email survey without reading the questions carefully. Plus, you receive excellent feedback about what went wrong and what went right in recent transactions. It’s important, too, to ask specific questions relevant to the type of purchase that was made—parts, service, new or used equipment, and rentals. You will have insights on how customers perceive your business and where you need to improve.

How phone surveys improve your service for heavy equipment

  • Increase your customer retention by 30% – 40%
  • Identify any problems quickly
  • Show your customers that you want to know what they think

If you’re wondering whether your dealership should conduct customer satisfaction surveys, take a look at the numbers. For dealers that conduct surveys regularly, compared to those who don’t, customer retention rates are about 30% to 40% higher. The reason is simple: those dealers receiving feedback on a regular basis can improve every part of their business, from heavy equipment service to sales to rentals to parts, because they discover what is wrong with their business, and they can react quickly.

With phone surveys your company can solve problem areas and issues before your customers take their business elsewhere, because they quickly become aware of the problems. If customers have issues with your services or process consistently, most of them will just leave without saying anything. When called for feedback on the most recent transaction, customers invariably are generous with compliments, which employees appreciate, and give honest reactions to any subpar performances, with details.

Why are phone surveys more reliable?

The feedback in customer satisfaction surveys should be obtained by phone, because customers typically provide more reliable answers, compared to email surveys. At Winsby, our team will usually reach a customer over the phone on every third call. And then once we are talking to them, about 97% agree to take the phone survey. This rate is much better than responses for email surveys, for which a good response rate is 2% of recipients. The other benefit of phone surveys is that they are interactive; your customers can fully explain any issues and the caller can ask follow up questions. For email surveys, we really aren’t sure whether they even read the questions!

It is more effective to use a third party to handle the surveys rather than someone from your dealership. The reason is that most customers are more honest with an outside person and will be more comfortable explaining problems to them instead of an in-house employee or someone they have worked with before.

How phone surveys work

The first step in developing a survey for an equipment dealer’s customers is to develop an effective calling script. Ask relevant questions covering what your customers care about and what is most important in your business. Key areas for dealers are typically heavy equipment service capabilities and availability, parts turnaround time, rental equipment availability, and new machine inventory.

Once you have your script, it’s important to speak with about 10% of the customers who were invoiced during the prior month. Record all the responses and follow up on any negative responses or negative scores immediately. Any departments or employees that are complimented need to hear the positive feedback. And any departments or employees that are named in negative comments should be told details as soon as possible. It is always better to contact the customer and apologize. Ask what you can do to make it right. Invariably, those customers are grateful that you cared enough to contact them and correct what the problems were, and they become extremely loyal customers. Had you not known about the problem, though, you would have probably lost them as customers.

How does your dealership benefit?

Customer satisfaction phone surveys make it possible to improve every aspect of your business, from heavy equipment service to parts to rentals to sales. These surveys help you understand what your customers think about you and your processes. The information you gain will allow you to fix problems fast and prevent any negative word of mouth or posting of online reviews.

Winsby compiles the 1 – 5 star scores and publishes one overall rating online, along with the individual scores and comments, providing feedback from actual, verified customers. Many of the online review forums, like Google, allow fake reviews to be posted from people who are not even your customers, and they make it difficult to have them removed. The compiled scores that Winsby sees for the equipment dealers are invariably over 4 stars. The reason is simple: anyone who is surveying their customers regularly cares deeply about how their customers are treated . . . and any problems are corrected quickly at the dealership. The result is retention of your customers increases by 30% to 40%.

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