And The Beat Goes OnWritten By: GARRY BARTECKI
Article Date: 12-01-2005
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
2006 will require faster decision-making with fewer people.
As we all know, you have to make hay in this business while you can, which translates into reasonable pre-tax profits and more than enough free cash flow to make ends meet and support business growth. As I was writing this, I heard the IRS had backed off on the tax audits disallowing depreciation on rent-to-sell transactions. That's great news, but I don't believe we've heard the end of this. AED will stay involved with this issue, and I suspect we'll be able to retain the ability to depreciate rental assets, although maybe not to the extent we have in the past.
My November column spelled out how I believe a dealer must manage transactions if they hope to avoid IRS problems in the future. Even after hearing today's news about the IRS, I'm sticking to what I said because it's logical and really the way the business runs today. I know making these changes may have some negative local tax consequences, but in most cases they are offset by the ability to take tax depreciation on rental assets, or by tax credits offset against any initial sales or use taxes paid.
Don Barnes and I will be discussing this topic, among others, at AED's 2006 Annual Meeting in January. In addition, we'll be discussing ways to reduce health care costs, improve efficiency through better use of business systems, and dealer valuation.
You may be members of 20 groups or you may get specific vendor data, but AED has access to data from all types of dealers within specific dealer areas. Wouldn't it be nice to know two or three months into a year that you are ahead or behind other dealers in your territory, giving you the ability to "adjust" before the year turns into a disaster?
Getting data to members faster means we need to speed up the annual Cost of Doing Business survey and report. There will be some changes to the survey questionnaire in 2006 - nothing major, based on member input, and we may tweak a few other items to make the output more meaningful.
But the most important change will be getting the survey in our hands by March 15, 2006. The goal this year is to get the final report by April 15. All we ask is that you provide your final adjusted results or your best estimate of those results. If you need help completing the survey, let us know and we can help. CEOs, make sure your CFOs are aware this change is coming and mark you calendars around March 1 to see if the data is scheduled to be submitted on time.
Where do I see things going in 2006?
All that being said, we have dealer members who recognize how their goals need to change and they are reacting to make their businesses more profitable and valuable. And we have dealers who are not reacting fast enough and really need to be more involved with AED and its members so they can learn how to manage a business in the marketplace of the future.
- Without a doubt, decisions will have to be made faster with less people costs than you have now. The industry has the technology to make it happen, but system providers tell us dealers only use 20 percent to 25 percent of their systems. Efficiency requirements are going to force changes to improve this statistic.
- Marketing studies tell us dealers only get a small portion of aftermarket parts and service business. Dealers have to find ways to reverse that. Marketing studies also tell us rental, which is a very management intensive business, is becoming more and more important to dealers and their customers.
- Costs will need to be controlled and even reduced as absolute margin dollars shrink because of competition and a lack of aftermarket business.
- Quality people will be hard to find and training will be required to turn average employees into quality employees.
- Consolidation forces continue to weave through the marketplace.
- Thinking out of the box is necessary, both by dealers and vendors.
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