Crossing the Chasm

According to recent Yard & Garden State of the Dealer survey results, nearly 70% of Tier 2 dealers said parts/accessories account for 20-40% of total dealership revenue, with the average being 25%. The closer you can get to 40%, however, the better off you'll be.

"It helps when your revenue mix is skewed toward high-margin, high-velocity items," Barerra says. "Really push shovels, gloves, rakes, safety glasses and trimmer line. Look into products such as toys, flashlights, and even clothing like Carhartt. Don't run out and buy a pile right off the bat. Do some tests to see what will sell. If something does, buy a tad more next year."

Well-run used equipment and rental departments can also help you improve your overall gross margin. They key with rental is to have what your customers need—typically things like aerators, chippers, skid-steer attachments, trenchers, edgers—and keep them "utilized" in the field. "The key with used equipment," Barerra explains, "is to get it cheap and turn it fast."

In regards to new equipment sales, buy right and take advantage of supplier programs, especially longer terms. Don't tie up your money if you can use the suppliers' money. "However, your best deal is often the everyday low price; then turn that inventory," Barerra says. "You can also keep an eye out for your suppliers' slightly damaged and overstocked items. Talk to your customers to determine if you have a market for these products. Selling last year's models can also work, as long as the line didn't undergo some serious improvements or price changes." Your focus has to stay on revenue generation and margin. It is this magical pair that will be your bridge across the chasm.

There's a lot to think about when trying to cross the Tier 2 chasm, which is why it's gotten the best of many a dealer. Just remember that every Tier 3 was once a Tier 2. By shifting your focus from operations to revenue generation, keeping your dealership lean and mean, establishing systems and processes for everything, and capitalizing on your high-margin opportunities, you can ensure that you'll be the next dealer to make it across.

Three Tiers of Dealers

Tier 1 - Annual revenue below $750K
• Rarely more than half of total dealership revenue from wholegoods sales
• Roughly half of dealer population

Tier 2 - Annual revenue $750K-$1.5 million
• At least 55% of total revenue from wholegoods
• Roughly 20% of dealer population

Tier 3 - Annual revenue over $1.5 million
• At least 65% of total revenue from wholegoods
• Roughly 30% of dealer population

Based on data from recent Yard & Garden State of the Dealer surveys

About the Author

Rick Barrera is a nationally acclaimed speaker, marketing consultant and author known throughout the Fortune 500 for his extraordinary speaking ability and his unique approach to brand building. His client list includes Husqvarna, Abbott Labs, AutoZone, Bayer, Caterpillar, IBM, Intel, Merrill Lynch and Verizon. Rick's latest book, "Overpromise and Overdeliver: Using TouchPoint Branding to Design and Deliver Extraordinary Customer Experiences," has made both the Wall Street Journal and Business Week best seller lists. It is available online at www.Amazon.com or www.overpromise.com. If you register your book on Barrera's site you'll get access to even more ideas for growing your business.