Outdoor Power Equipment

March 2018

Proudly serving the industry for which it was named for more than 50 years, Outdoor Power Equipment provides dealers who sell and service outdoor power equipment with valuable information to succeed in a competitive market.

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www.outdoorpowerequipment.com OUTDOOR POWER EQUIPMENT MARCH 2018 29 "Dealers should select lines where they can fully represent the price points that work in their market and where they can differentiate lines and models across the spectrum," he said. "If dealers find buyer preferences changing, it is okay to change stocking patterns, but they should work closely with their manufacturers and distributors to identify the right assortment and trends for their market." In all markets, it pays to continuously evaluate your customer base and customer buying habits. Pay close attention to product diversification within your primary business, but also remain open to bringing in adjacent offerings such as ag, powersport or UTV lines to best satisfy customer needs and ensure consistent cash flows through all seasons and buying economic cycles. Where seasonality impacts the products you carry, it makes sense to diversify your product mix to ensure a continuous stream of revenue. Preventing too much inventory or stale inventory As Horak mentioned, inventory turn is a major factor in the success of a business. Focusing on providing the products and services that meet your customer's needs in the markets you serve should be the priority. "It can be enticing to leverage manufacturer programs and stock up on inventory; however, this can lead dealers to stock elevated levels of product that is not demanded by their customer base," he said. Increasing ordering quantity only makes sense when the product is turning fast enough to compensate for the rising inventory carrying costs. As less desirable inventory ages out, it takes up prime floor space and cuts into revenue margins. At that time, you should be quick to liquidate and to seek guidance from your manufacturer and distributor partners even if that means selling at a lower margin target. Inventory management pitfalls to avoid When it comes to common inventory mistakes, "look at moving equipment that you might have to discount," said Horak. "Avoid the pitfall of carrying equipment too long before you sell it. In the inventory finance business, when a piece of equipment has a 'birthday' (ages beyond 365 days) it is time to liquidate, not celebrate." He added that dealers should remember the lower margin generated from a discounted sale on mature inventory almost always saves dealers money verses holding out for a few points, continuously paying higher flooring charges, and being forced to wait until the next selling season rolls around again to move the product. Proper planning Horak recommends taking a top- down approach to evaluating your market and your business. You have many things to consider, ranging from global trends such as water restrictions, "green" equipment push, and fuel costs to more local issues such as the timing on municipality contract expirations, restrictive local legislation and availability of licenses. These items should help you shape your expectations to create a business strategy and budget that will guide performance. Determine which critical few business metrics are the most relevant for your objectives (inventory turn, margin, liquidity, etc.) and truly manage to those metrics. "Often times we see customers do the right thing from a planning perspective, but fail to truly measure their performance in relation to their goal," said Horak. "We strongly recommend dealers sit down with their key business team at a minimum each quarter to truly assess where they have excelled and where they may need to focus." Editor's Note: Wells Fargo Commercial Distribution Finance (CDF) works with more than 200 manufacturing partners and more than 11,000 dealers, including some of the biggest manufacturers, in the lawn and garden industry. In addition to a host of other products and services, Wells Fargo CDF helps its partners put together inventory floor plan programs so dealers can have inventory on hand when a customer walks through the door. For more information about Wells Fargo CDF, including access to Wells Fargo CDF's Learning Center video series on inventory management and other related topics, visit https://cdf.wf.com. OPE "Dealers should select lines where they can fully represent the price points that work in their market and where they can differentiate lines and models across the spectrum." — MIKE HORAK

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