Spring has come and gone, and we are now just over halfway through the year. Hopefully the spring season kicked off well with sales up and equipment making its way out the door. How are your sales doing thus far? How are they stacking up to what you projected? If you don’t know, now is a good time to go through a halfway budget check.
“A budget check is important because it gives you the chance to either fix areas that aren’t meeting budget or capitalize on areas that are exceeding expectations,” explains Kelly Yunker, distributor for Power Equipment Systems in Salem, OR.
BUDGET CHECK TIME
Dealers should be sure to do a budget check at least halfway through the year, no later. “If you don’t stop and look to see where you are six months in, you’ve lost a lot of your action time,” explains Tom Shay of Profits Plus (profitsplus.org), also a former dealer. “In this business, when you get to June, you are not just halfway through the year, but for most of us, you are halfway through the season.” Waiting until well after the midway point will leave you with fewer options for making adjustments that will affect the rest of the sales year.
While executing a halfway budget check is a good exercise, doing a budget check more frequently if you have time is even better. “While the six-month time period makes sense, I would hope dealers look at things more often over the course of a year,” Shay says. “Ideally, the budget should be revisited quarterly or every other month.” Shay warns that anything more than every other month could become tedious and counterproductive.
However often you do it, be sure to do it yourself or be involved in the process if done by an accountant. Shay warns against dealers trusting their finances in their entirety to an accountant. “There isn’t an accountant out there who knows as much about your business as you do,” Shay says. “It’s your job as the owner of the business to understand the financials and know how to make projections.”
CREATING AND MONITORING YOUR BUDGET
There are several things that dealers should consider when outlining their budget. They should consider all the money coming in, and all that goes out. One way that Shay suggests dealers do this is by reviewing their profit and loss statements for a year or two prior.
“You should create a budget based upon what has occurred in the business over the last year, using that to forecast what you think will happen in the coming year, breaking down each month,” explains Shay. “Then, every time you come back to your budget, look to see how you are matching up and update it where you think necessary.” Any updating should be a simple fine-tuning of the numbers, not huge jumps.
As a distributor, Yunker says she encourages dealers not to do much adjusting to their sales budget, but rather their expenses. “There may be areas where expenses are less than budgeted, and we don’t want to lose track of those gains,” explains Yunker. “Also, if we had unexpected expenses, those should be recognized in the budget. The budget shouldn’t be so far off track that it becomes unrealistic and can’t be used as a tool for tracking the business.”
Keeping an eye on expenses and adjusting them as needed is easy with an exercise Shay introduces. “Breaking them down into categories makes them more manageable,” says Shay.
Once all of the expenses are written out (rent, payroll, property taxes, utilities, etc.) go through each and mark them with the letter “F” for fixed or “V” for variable. Then go through them once again and use the letter “U” for uncontrollable and the letter “C” for controllable.
“Take it all with a very liberal dose of consideration,” urges Shay. “You may say your rent is fixed, but if times are tough, you may be able to work something out with your landlord.”
Anything that is categorized as “UC” (uncontrollable fixed) can be set aside, because there is nothing more that you can do with it. “Everything else left on the list is subject to negotiation in part or completely,” says Shay. “Seriously look at those costs and see what is getting out of control.”
REMEDYING WHAT YOU CAN
Once you have figured out what in your budget you can control, it’s time to take some action. “Once you’ve discovered you are not hitting your numbers, look to see where you can cut costs and make sure you are not overstaffed,” says Yunker.
Cutting staff may be hard decision, but it may also be a necessary one. “In most businesses, there is a line that you draw, and you decide to let somebody go while letting a few others work overtime,” explains Shay. “I’d rather pay the overtime in order to get through the season, knowing that once I get through it, things are going to ease up and it will end profitably.”
At this halfway point, dealers should be keeping an eye on their equipment inventory levels, working with their distributors to find solutions to any overstock. “Dealers should focus on selling equipment that is on a floor plan, and be upfront with their distributors about any problem areas,” says Yunker. “We are here to help them move product through.”
As usual, dealers can work with their distributors on open houses and focused mailings utilizing co-op funds, to help advertise and push products. Yunker warns that advertising is one place where budgets should not be cut. “Right now, advertising and getting your name out there is not where you want to cut costs,” Yunker says. “This is especially true if you are seeing growth in certain departments like service. Now is the time to capitalize on that.”
Assessing your budget halfway through the sales year or more frequently can put you on track to a more profitable year. Spotting areas in the budget that need to be worked on, and those you could profit even more from, can turn the year around.
It may be time-consuming, but your business and bottom line can benefit greatly. “For those who say they don’t have time, what do you think is more important?” asks Shay. “Going out there and trying to sell, sell, sell or knowing whether or not you are profitably selling?”
HALF OF DEALERS STRUGGLING, A QUARTER GROW SALES
A recent survey of Yard & Garden subscribers reveals that more than half of outdoor power equipment servicing dealers say business has been down this year, but another quarter say business has been better than they’d expected. Larger, equipment-focused dealers seem to be faring the best, while mid-size dealers appear to be struggling the most. Smaller, service-focused dealers are also holding their own.
According to the survey results:
• 22% of dealers say business has been significantly down
• 31% say business has been down slightly
• 21% say business has been on budget
• 26% say business has been up (surpassing expectations)
Results of the survey have been segmented by “dealership sales volume” to identify differences between smaller, service-focused dealers and larger, equipment-focused dealers:
• 35% of dealers have annual sales under $500k
• 20% of dealers have annual sales from $500k to $1 million
• 45% of dealers have annual sales over $1 million
Mid-size dealers seem to be getting hit the hardest during this recession. While 22% of all dealers report sales being significantly down so far this year, 38% of all mid-size dealers report sales this way. Concurrently, where 59% of smaller dealers and 52% of larger dealers report steady to slightly increasing sales, only 23% of mid-size dealers have fared that well.
The larger, equipment-focused dealers are the most likely to have enjoyed a sales increase thus far. Roughly one in three of these dealers report that sales have been up, compared to 26% of dealers overall.
The majority of dealers have seen a decrease in total business among each primary customer group (landscapers, municipalities, homeowners). The homeowner segment has fared slightly better, as 54% of all dealers report a decline in business, compared to 64% of all dealers for landscapers and municipalities.
Larger dealers have enjoyed the most success. Roughly 64% report steady to increasing sales for landscapers, 46% for municipalities and 61% for homeowners. In fact, 25% have seen an increase in business from landscapers, and an even more impressive 43% have seen an increase from homeowners.
Mid-size dealers have again been hit hard, as 77% report a sales decline in each of the three main customer groups. More alarmingly, 58% report “significant” declines among landscapers and municipalities. Mid-size dealers have fared much better with homeowner customers, as only 23% report significant sales declines.
To view a full summary of the survey results, type "Yard & Garden Dealer Survey" in the search box in the upper right-hand corner.