Crossing the Chasm

The size of your business isn't always the best measure of your success. However, if you want to seriously play in the wholegoods retail market, consultant Rick Barrera says you need a strategy to grow sales fast, while remaining lean and mean in the process.

When a dealership evolves from "small repair shop" to "growing dealership with an increased emphasis on equipment sales," managing for profitability becomes much more difficult. These mid-level (Tier 2) dealers often see a 3-5% jump in overhead. Expenses such as payroll, training, advertising, fuel, maintenance/repairs, office supplies and insurance often increase.

The interesting thing is, as the mid-level dealer grows sales and becomes a "large" dealer, his overhead often remains the same. He's simply making better use of his assets—and making more money in the process. That's why, Barrera explains, mid-level dealers need a strategy to rapidly grow sales while keeping their operating expenses in check. Otherwise, the chasm known as Tier 2 can be difficult to cross.

But it can be crossed. You just need to hunker down, focus and remain diligent. "There are a lot of things you can do to manage yourself through Tier 2," Barrera says.

"Don't think you have to do them all at once. Focus on one at a time as you rapidly work your way across the chasm."

Change focus from operations to revenue

The first thing you have to do is transform your way of thinking. Smaller, service-oriented dealers are typically more operations-focused. They're transfixed on the process of getting machines in the door, serviced and back out the door. They tend to see things more from their personal point of view.

Mid-level dealers, on the other hand, need to focus on revenue generation. "They need to really get customer-focused and start viewing their business through the customer's eyes," Barerra says.

Ask yourself:
• Where do my customers and potential customers live?
• How can I serve them?
• How do I reach out to them?

"Start making a name for yourself," advises Barerra, who happens to be a big fan of direct marketing. "Oversized postcards to specific zip codes are great. You can also make phone calls into those zip codes. You can really start to reach out in a very targeted way, and it doesn't cost that much."

Reaching out is even easier if your target is landscapers, which is an easily identifiable market. Look through the Yellow Pages. Pay attention to the trucks driving around your area. Develop a prospect list. Call these guys and set up appointments to go see them to learn what you can do to earn their business. Sometimes, all you have to do is ask for that business.

"A lot of times, landscapers haven't been feeling the love from their current dealer, especially when that dealer has been growing his customer base," Barerra points out. "You may have a chance to poach some business. Similarly, you can go after other commercial customers, such as golf courses, nurseries and municipalities."

In addition to direct marketing, Barerra says you should considering doing some special events. Again, identify who you want to target and tailor the event toward that customer. For example, incorporate more family fun events if you want to draw consumers. Put together some business sessions for landscapers. Municipal workers often enjoy safety and equipment maintenance clinics.

"Whatever you decide," Barerra reminds, "you have to start doing some aggressive marketing so you can cross the Tier 2 chasm as quickly as possible—preferably in a season or two."

Lean and mean

Challenging growth goals like that definitely require a revenue-focused mind-set. Still, it doesn't mean you can completely lose your focus on operations. As pointed out earlier, operating expenses typically rise 3-5% in Tier 2, which has a direct impact on your net profitability. Efficient operations become as important as ever in Tier 2. You just approach it from a different angle.