Your Role in a World of HurtBy Garry Bartecki
Article Date: 10-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
For very little cost, you can provide the help contractors desperately need.
Last month I discussed AED’s value-added proposition. This month I offer suggestions on what dealers can do as “value added” for customers, because I think there is more there than meets the eye.Two events took place last month that led me to this conclusion. First, I attended a political fundraising event primarily attended by contractors. Second, I had the privilege of drafting an article about the state of contractor financing along with two construction experts. As a result, I realized that your issues are their issues and that your input and expertise could help them deal with these issues.At the fundraiser, I was sitting at a table filled with contractors and it dawned on me that the topics we were discussing were the same topics I would be discussing with a group of AED members. Taxes, depreciation, federal and state funding, used equipment values, bank financing, lack of workforce, etc. Sound familiar?After going through the contractor financing research I concluded that most contractors are in deep doo-doo because of the current sub-prime mess. Banks are not interested in increasing their exposure in real estate or real estate related activities, which leaves the contractors out in the cold. Sure, there are some banks doing deals, but what they are looking for in customers will be tough to meet. Come in with a strong balance sheet, plenty of equity, a product mix to spread risk and a history of working through business cycles and they may talk to you. What this all boils down to is there will be a decrease in available work as backlogs dry up. The work will be more competitive because there is less of it. Contractors will have a hard time finding financing to do the work because of lower volume and less profit. We are creating a gap in the work between the current work on the books and new work that may not become “work” until late 2010 or 2011. A perfect Catch-22. Do you see where I am going with this? This is your perfect opportunity to bring value added to your current as well as proposed customer base. Your customers badly need your help and you can help them!In exchange, you improve your hit ratio on the available work in the pipeline now and in the future.
What could you help them with? Plenty. For example:
Other contractor needs include:
- Help them save some money or get money back from the IRS. Keeping in mind that cash will be king, this is a great way to start.
- Help them clean up their fleets. Get rid of the units that are not being highly utilized and teach them how to rent instead. Help them generate cash flow by selling units that are “in the money.”
- Replace four old units with two new ones with less down time.
- Explain how equipment financing works currently.
- Help them clean up their balance sheets, which they need for bonding and financing purposes.
- Find out which banks are still working with construction customers and compare their terms and advance rates. Have an experienced banker explain current market conditions.
Can you do this? Yes, you can and for little cost. You can do this as a webinar, as a meeting or with a newsletter. But whatever you do, you want to make it a monthly or semimonthly effort so they continue to show up for your help. If you do your homework and solicit local help chances are you will only sustain coffee and donut costs. The point is, you want to be the sponsor; you want to administer the program and you want to develop a relationship that will convert to new business. Need input? AED can help. Many AED programs fit the bill. As long as you participate why not add a few more to the audience?Bankers, lawyers and accountants will jump at the chance to help you out. Just make sure they are industry experts before you take them on. If you need help finding some folks, we can do that.I believe our contractor friends are facing a world of hurt. Now it’s your turn to provide the “value added,” and you can do so for a little time and effort.From your standpoint, I would take this opportunity to sit down with your top 25 customers to find out what their needs will be for 2009 and 2010. Inventory is an issue, interest rates are sure to start increasing, price increases are coming, and you have to prepare your plan for the next two years. Best to get a handle on expected buying trends before you start the plan.You can call me to discuss a value added program at any time.
- Business plans to support financing requests. Plans need to be professionally prepared and presented.
- Plans need to demonstrate management knowledge and experience working through cycles.
- Plans need to demonstrate how management will adjust operations and costs if revenues fall.
- Plans need to demonstrate how management will handle debt service.
- Plans need to include balance sheets, income statements and cash flow analysis.
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