Municipal Business as a Steady Income StreamBy Mary Sedor
Article Date: 06-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.
If you do your homework and get to know their world - and their specs - you may wind up with a recession-proof base of customers.
Maintaining a steady customer base, especially in challenging economic times, is a difficult task for even the most veteran of dealers.
However, Liftech Equipment Companies in East Syracuse, N.Y., a dealer relatively new to the construction equipment scene, may just have the perfect category of customer for a steady income stream, regardless of the economic climate: municipalities.
Although Liftech was established in 1988 as an industrial equipment dealership, the company only became a construction equipment dealership in this decade; 2008 marked the company’s sixth year as a JCB dealer.
While some dealers pass over municipal customers saying that they are too difficult to handle or require too much work, Liftech has embraced them and learned how best to meet their needs. During its six years in CE sales, municipal and government customers have accounted for approximately 25 to 30 percent of the company’s business, said Bruce Prashaw, construction equipment general manager.
“We look at municipal business as a key to establishing ourselves in the construction equipment business,” said Prashaw. “Machines sold into municipal markets are very visible – they’re working on and along roads. It’s also a stable market – there aren’t the same fluctuations as with other markets.”
Prashaw sees parallels between working with municipal customers and regular contractors.
“It’s like selling to any other customer – you need to develop relationships with people, call on them and find out what their needs are,” said Prashaw. “It’s a little more call-intensive, and there are more people you need to see, convince and have discussions with, but other than that, it’s not a lot different from selling to anyone else.”
One misconception that dealers have with municipal business is that it’s a low-bid business, says Prashaw.
“If it were low bid there would only be one supplier,” he said. “Municipal customers buy the equipment they think is going to allow them to do their job the best, and, not unlike contractors, they use different methods to purchase that equipment. One method is going out to bid; another is buying off of state bids. But either way, they want the best equipment to help them do their jobs.”
Keep in mind, says Prashaw, that each state has its own method for purchasing equipment. For example, in New York there is a state bid process, but in other states if a dealer sells to one municipality, other municipalities can buy at that same price without going out to bid, explains Prashaw.
“Each state has its own rules and regulations,” he said “Talk to someone you can develop a relationship with, someone who will explain what the process is in your state or for your municipality. You need to understand it because the laws are very strict and the people at the municipalities will adhere to them very closely.”
Although the product support aspect of working with municipalities is weak, as they tend to do their own service work, the benefit of establishing relationships with them lies in the stability of the market, explains Prashaw.
“Some dealers are afraid of municipal business and I don’t understand that,” said Prashaw. “They say it’s harder work and that you have to make more calls per sale, but it’s recession-proof. We’re in the midst of one of the worst recessions in 40 years and municipalities still have to plow roads, pick up the garbage and do their jobs everyday. Their budgets might have been cut but they still have to get their jobs done, and they still have to buy equipment.”
Getting in the Door
When they first got started working with municipalities, Liftech took time to understand the municipal procurement process before jumping in to the market.
“We asked a retired highway superintendent to come in and spend half a day with us,” said Prashaw. “He explained the entire process they go through. It made it easier for us to figure out how we could interface with them.”
The next step required lots of leg work.
“We went and knocked on doors,” said Prashaw. “The people are easy to find and you figure out relatively quickly what time is best to catch them there. You have to do a lot of cold calling.”
Another important factor to getting in the door with a municipality is to participate in industry organizations that are meaningful to them. Prashaw says that in his area nearly every county has a highway superintendent’s association, and they have monthly meetings. He recommends that dealers join the associations that make the most sense for their territories, and then go to the meetings.
“Be visible. Some of the highway superintendents won’t talk to you when you come to see them if you aren’t active in their association,” said Prashaw. “We did that early on and cold calling got us in the door. Find the ones that are open and willing to talk to you, find out their needs and learn how best you can serve them.”
Meeting Their Needs
Liftech’s territory spans four states and includes a variety of different types of municipalities, including rural areas and medium-sized cities. In the metropolitan areas, Prashaw explained that they often drive their machines on the city streets to reach their jobsite, which could be fixing a water main break. The same machine has to be able to break up the concrete or asphalt, excavate the material, backfill it then tamp it, he said.
In rural areas, municipalities do everything from pushing back snow banks to adding dirt to back roads, as well as their own construction and maintenance.
“In both small and large municipalities, they try to do many different chores with a limited amount of machines,” he said.
In addition, working with municipalities requires that the dealer get to know the municipal budget.
“They all work off of budgets, and they are pretty tight,” said Prashaw. “They also normally have a schedule to replace the equipment and they try to adhere to it because if they postpone the purchase a year, all of a sudden they have to make two purchases the following year.”
Prashaw says that they generally have replacement schedules in mind for the equipment, and will share that information with you.
“That doesn’t mean that you’ll sell to them, but you can find out what they are planning to buy and you can start to think about how your equipment fits their needs if you have the chance to sell to them, just like any other contractor,” said Prashaw.
Tips to Keep in Mind
Prashaw says that dealers interested in pursuing the municipal market should pay attention to specifications established by the municipality when they are going out to bid for a new piece of equipment.
“When you’re bidding, you have to have the mindset that you’re going to comply with the specifications exactly,” he said. “If you don’t provide everything that they’ve asked for you can get into some problems. There is very little slack in what they are going to buy.”
Even if the bid spec is 30 pages long, Prashaw says, read all of it.
“Read their bid spec carefully and compare your equipment to what they are asking for,” he said.
Finally, keep in mind that municipal business is slow and steady – but it’s worth the effort.
“There is lower risk involved,” said Prashaw. “Not many municipalities have gone bankrupt. It’s a pretty safe business.”
[ TOP ]