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December 2017
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“Little data” still important

As you probably know I am a true believer when it comes to benchmarking numbers as often as possible during any given year. I say that because:

The benchmarking points out specific areas for review allowing for adjustments to be made before things get out of hand.

Benchmarking helps keep department managers on their toes because who wants their numbers to come in at the bottom of the list.

Benchmarking results can be shared with bankers and other partners to demonstrate how you are doing against industry standards.

Benchmarking makes you think about the numbers that go into the analytics, which helps managers envision how dollars flow both in and out.

Dealers that benchmark normally have a better handle on where they stand and what they have to do to improve their business.

And last but not least, if you do not benchmark how would you measure your performance.

There is a lot to be said for benchmarking, if you do it right and with the right participants. Material Handling dealers are fortunate because they have an active association that provides benchmarking services to members. We are, of course, referring to MHEDA which produces an annual DiSC report for both Industrial Truck dealers and Storage & Handling Engineered Systems. Participate in this service and you receive a FREE DiSC report that is customized for your business. But if you are a member and do not participate you can receive of copy of the general report for $275, which you can use to analyze your 2014 operating results.

There are other ways to benchmark as well, but I doubt if they will provide what you can receive from the DiSC report. Many OEM’s will provide reports based on groups representing one brand, or you can get exposure to the entire industry via an open forum where many brands are represented. 20 Groups also frequently provide reports throughout the year that provide more timely data.

To me there is no doubt that benchmarking provides valuable input to help improve operating results and shareholder value.  But you would be surprised at how many times I hear “It takes too much time to fill out the survey”, or “We can’t get it completed in time to meet the deadline”, or “Our books are not set up in the same way as the survey so we don’t participate.” I kid you not.

My response to those making these comments is …If you cannot complete the survey by the deadline (4 months after the year-end); it takes you more than 2 hours to fill out the survey; or you don’t have data compiled according to industry standards, you have problems well beyond the inability of filling out the survey that need to be addressed if you hope to remain a dealer in this industry.

I have a copy of the 2015 MHEDA DiSC report in front of me and just spent maybe an hour or so reading it cover to cover. I do this every year and continuously come away with how well lift truck dealers are managed through the many economic cycles they encounter. I am especially impressed after reviewing the historical data that appears in the back of the report that covers 2007-2010 and 2014, which of course covers our last depression period (I call it a depression) in 2008 and 2009.  Of the 100 dealers that annually participate in the survey the DiSC report reflects at least a break-even in 2009 with an overall recovery in 2014 to the point where profit before tax is three times what it was in 2009.

More specifically, the DiSC report provides income statement data, departmental data, productivity statistics, operating expense data, sales mix, departmental gross profits, balance sheet data and financial analytics to help measure historical results and form future business plans.

The reports are further broken down by sales volume and region. Of most importance is the column titled High Profit Dealer which represents the top 25% quartile of the reporting dealers. Comparing the High Profit Dealers to the others points out how small differences can add up to significant improvements in bottom line. For this report the High Profit group generated a 6% pre-tax compared to 3% for the Typical Dealers.

One big issue for me is the fact that the size of both Typical and High Profit dealers are approximately the same. In the past the High Profit dealers were usually the larger dealers with the leverage ability to deliver higher contribution margins. Thus the smaller dealers were always saying they couldn’t hit the High Profit mark because they weren’t big enough to get there. But now that both the Typical and High Profit dealers are of similar size I suggest we can throw the old argument out the window.

We hear a lot these days about Big Data and I believe that Big Data will provide many opportunities in your industry. But at the same time I remain fully committed to using the “Little Data” we find in our monthly financial reports, our OEM reports, our 20 Group activities and this annual DiSC report because there is plenty of money to be made by getting a better handle on the Little Data.

Our industry continues to change. There will be continuing consolidation. Sophisticated uses of more data will help drive business, especially the use of telematics that will help both dealers and end users control costs and improve efficiency. Big Data will also help determine customer needs and the timing of those needs. No matter whether we want it or not, the internet-of-things will bring change and disruption to the industry. All the more reason to get better control of our Little Data to help us manage both the Little and Big Data going forward.

In conclusion I will say every dealer should benchmark as much as they can, and every dealer should participate in a 20 Group which provides a forum to discuss planning ideas for the future. I can guarantee that both endeavors, if taken seriously, will deliver better operating results and shareholder value.

Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail to contact Garry.