In the farm equipment industry, market fluctuations are inevitable, and downturns bring unique challenges. Dealerships must find ways to maintain profitability and efficiency while adapting to reduced demand, often requiring difficult but necessary operational adjustments.
When the industry contracts—sometimes by as much as 30%—dealerships must “rightsize” their operations to match the realities of the market. This involves balancing strategic changes with the resources at hand to remain resilient and competitive.
Adapting to current conditions is essential, and success often hinges on thoughtful, timely, disciplined decisions to streamline operations, and preserve cash flow. The following strategies offer actionable steps to navigate the challenges of a down market.
1. Prevent Administrative Burden from Growing
If you evaluate your dealership expenses you will find that a high percentage of your expenses “walk around on two feet”. Adding people or pushing into new segments can quickly inflate operational costs, which may not immediately yield results in a slow market. Each new hire, product, or service comes with overhead costs: salaries, training, inventory management, and marketing expenses, to name a few. If you’re not removing underperforming products, reducing staff, or eliminating redundant services at the same time, the overhead will creep up and potentially erode your already thin profit margins.
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Audit your team for both underperformance and also opportunities. The underperformance becomes a burden. The opportunities in others allow you to find opportunities to streamline the roles and functionalize. In a down market, you can’t afford underperformance; however, the work must get done. You also need to manage your number of revenue generators in equipment sales, parts sales, and service to ensure you have a healthy mix of revenue generators and managers and associated roles. When you are down say 20-30% in revenue you are likely feeling that impact. A rule of thumb is that 75% or more of your total employees should be revenue generators.
2. Focus on Quality over Quantity
During a down market, it’s critical to focus on depth rather than breadth. Avoid the addition of new people, products, or initiatives without removing an equal number of underperforming or redundant elements from your dealership. This "one in, one out" approach helps keep your dealership lean, efficient, and adaptable. Many dealers I meet are already feeling “out of time.” Let’s not compound this issue by adding responsibilities without making room for them.
Instead of adding more products or services to your portfolio in hopes of attracting new customers, zero in on what your dealership already does well. Find ways to improve or streamline current offerings to maximize their value to your customers.
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Consolidate Vendor Relationships: Dealers often juggle numerous vendors, but in a down market, consolidating your relationships to a select few can simplify operations and strengthen purchasing power. Reduce complexity by eliminating low-volume or unreliable vendors. Focus on the products that offer the highest margins or are in the highest demand. Ensure your sales team is thoroughly trained to sell these products and double down on marketing efforts around them.
3. Preserve Cash Flow by RightsizingYour Inventory
Dealers often sell down their equipment as fast as they can to rightsize their inventory which is admirable. But unless you’re eliminating slower-moving items to make room for new equipment, you’re at risk of bloating your inventory, which can tie up crucial cash flow. What normally happens is we focus our equipment sales teams on equipment that customers want to buy, versus what we need to sell. Meaning that our harder-to-sell inventory gets older and older, and sucks more and more interest and curtailments out of our business.
The goal has to be to sell the “Inventory we need to sell, so we can replace with inventory customers want to buy.” Streamlining your inventory and focusing on faster-turning, higher-margin items will free up cash flow and improve profitability however that is often painful.
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Implement a “Dead Stock” policy: Set strict time limits for how long equipment can sit in inventory before it needs to be discounted or removed. Drive visibility the need to sell the harder-to-sell inventory as it will not get any easier or better with age. Share with your team the true cost of carrying the inventory both in interest expense, but also in the ability to bring something in that will turn quicker and be easier to sell.
Leverage data when ordering. If you can consolidate your inventory to what the majority of customers will buy and stock those units versus trying to solve every customer need with outlier options and equipment. Special order those outliers to keep the higher turning version in motion.
4. Align Staffing to Market Realities
Dealerships are sized for the business they historically operate at. Hiring without eliminating underperformers or redundant positions creates a bloated workforce that can strain profitability. Instead, streamline your team by aligning staff levels with current demand. Focusing on top performers and eliminating redundancies ensures that your dealership remains agile and efficient. This is likely the hardest part of managing your business in a downturn especially if you have smaller departments as it gets tough to staff them when the team has less than a handful of employees.
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Cross-train staff. Instead of hiring for every specialized role, develop a mindset of cross-training your current employees. This will allow your dealership to remain nimble, with employees able to take on multiple responsibilities as market conditions shift. This is always a challenge to reassign tasks and responsibilities, but allows you to keep people employed and still get the work done. It is always hard to ask people to do more, but it could be essential in a downturn.
Reward performance, not presence. It’s crucial to keep the most productive, versatile employees. Establish performance-based incentives, and ensure that every role contributes directly to your bottom line.
5. Avoid Decision Paralysis: Set Deadlines to Make Decisions
One of the biggest risks in a down market is decision paralysis. Dealers often delay decisions, hoping for improvement in the next month or quarter. You may hesitate to make necessary cuts, worrying about their impact on morale or potential service disruptions. While these concerns are valid, setting a clear deadline for making critical decisions can prevent delays that might jeopardize your business. Without a defined timeline, you risk waiting too long for a revenue recovery that may not materialize soon. Adopting a "one in, one out" philosophy enables dealerships to maintain lean and focused operations while driving continuous improvement. Remember, “No decision is a decision—it’s a decision to stay on the same path.”
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Set monthly or quarterly decision targets: Treat key decisions as an ongoing practice. Each month or quarter, identify a set number of tasks, products, or key items you are going to make a decision on. This creates a culture of continuous improvement. By setting a strong timeline and aligning around it you can help prevent decision paralysis.
Engage your team. Get input from your team on areas of improvement. Often, frontline employees will have insights into inefficiencies that leadership may overlook.
In challenging times, it’s easy to hope that things will improve on their own—or that more products, services, or people will save the day. However, the real key to success lies in disciplined streamlining. Consistent discipline, persistence, and strong leadership are essential to navigating a down market. By adopting a “one in, one out” approach, you can maintain balance, ensure steady cash flow, and keep your dealership agile enough to adapt to market changes.
The farm equipment market will recover, but survival in a downturn requires thoughtful, data-driven decisions and setting a defined time to make the decision. By focusing on eliminating inefficiencies as you add new opportunities, you’ll emerge from the downturn stronger and more competitive than before.
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