Current Issue
Material Handling Wholesaler Cover
November 2017
Warehouse efficiency is being driven by technology today. Read more in the November issue.

Industry News

View Material Handling Wholesaler's profile on LinkedIn



Foggy horizon
Garry Bartecki
Garry Bartecki

Every time I think the recession is over, it isn’t.  Every time I think we can do some serious tax planning, we can’t. Every time I think we are staged for profit improvement, we aren’t. After going through this continuous up and down cycle your ability to make business decisions you really believe in get a little foggy to the point where all you are doing is guessing and hoping your decisions pan out.

The swings in the economic metrics are enough to drive me nuts. Up. Down. Adjustments. More adjustments. QE. Tapering. Playing with interest rates.  All it means to me at this point is the trends are not on a steady growth path. A growth part indeed, but a very shallow one. When I check the stats for the lift truck industry they are still nothing to write home about. There may be a shining light out there but it is hard to tell how far away it is. 

On the other hand, prices are going up for many of the products you use meaning pricing has to increase to stay even. Raising prices, however, is still very hard to do.

As far as serious tax planning goes there is nothing much for a dealer to do until 2016. Baucus had a Senate Bill which reduced Corporate Income Tax rates, eliminated many deductions and loopholes and entirely changed the way you depreciate equipment. Dead on arrival.

Camp then produces the House Bill reducing Corporate Rates and making similar changes to reduce deductions and loopholes. Also, dead on arrival. This Bill arrived on the day I had a tax webinar scheduled for 2pm, with the Bill released around noon. I can tell you the two hours from noon to 2pm were a little hectic with my tax guru Steve Pierson flipping pages on the Bill as we were on the air. I don’t know how he did it but the material was well presented even though it eventually went nowhere.

So, in the end your serious tax planning at this point should be to push as much income forward as possible to take advantage of what appear to be lower rates when they finally pass tax reform.  I get a distinct impression if they lower the Corporate Rate they will also lower the rate on Flow-Through Entities to give them equal status to a C-Corp.

Pushing income forward sounds easy enough but it is not. About the only remedy available to equipment dealers at this point is LKE.  As I have said in the past if you used Bonus Depreciation any units you sell at this point probably have little or no tax basis, which will produce ordinary income taxed at today’s high rates. Check out Ron Hodgeman at WTP Exchange if you need information about LKE. Do it right and it works.

Profit improvement continues to be tough to do. You must remember the need to control sales and margins against payroll costs or see net profits decrease. Bottom line is your gross margin as a percentage of payroll costs are one of your controlling KPI’s to manage profits. I am sure you have seen the different scenarios presented by Dr. Bates over the years pointing out how to maintain or grow profits, many of which deal with sales prices, cost of sales and payroll costs.

I think we can assume that new business will be business you take from a competitor, but finding ways to get customers to switch vendors is a real problem. When I get the chance to talk to dealers I find many dealers do not remain in contact with their customers as well as they should, especially small accounts. Let’s face it, marketing costs money, and when you figure what it costs to attain a new relationship there is little doubt dealers should remain in contact with every customer they have and have had.

I came across one dealer who used safety training as a profit center using a high-end program to attract equipment operators from companies using competitive brands. As it turns out this became a very successful marketing program because the dealer is getting customers using competitive products into his/her tent they can get to know and follow up with when new equipment is required - a very cost effective marketing program.

I paid a visit to ConExpo in Vegas. A great event if you have good shoes. I have to say the construction industry is upbeat and a lot of equipment sales were made. During ConExpo, Cat announced they were putting their NA dealers under review because they are underperforming when compared to the entire international dealer network. All I could say was “Wow.” Could your OEM’s be far behind? After walking through ConExpo a couple of time you have to ask yourself “How many of these things do we need?” ……..Hmmmm.

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

 

 

 

 
-End-  


ADVERTISEMENTS