Garry Bartecki, CFO of employee-owned Illini Hi-Reach and Material Handling Wholesaler Bottom Line monthly columnist Garry Bartecki


What a week. Just finished listening to Jim Cramer summarize the Q1 results from the major retailers. Worse than expected, with their stock prices taking a hit. The main reasons for these results are:

  • Unexpectedly high costs throughout Q1
  • Inventory impairments
  • Sales mix changes
  • Supply chain disruptions
  • Freight Costs

Revenues may have been close to expectations. The gross margin and the operating margin, however, both missed.

Foot traffic was up but sales patterns changed to more essentials as opposed to big-ticket items.

The freight and transportation cost increases were staggering. About $1 billion for Target was not expected.

I would expect any distributor of pre-packaged goods to fall under this array of disruption. Most will be taking hits unless they fall under the “Discount Store” umbrella which is doing better at hitting numbers.

The important thing here is that “higher cost,” “inflation,” and “supply chain problems” are now only becoming known in the public sector. Consequently, dealers can expect to be exposed to these issues through their distributor customers and hopefully have courses of action planned out to assist customers and avoid collection problems.

Are pre-packaged distributors the only customers to worry about? I doubt it. Every business with a significant distribution function will also have to deal with the five “reasons” noted above. And as far as manufacturers are concerned, they are also subject to the five “reasons,” different from the distributor level of disruption, but still disruption that will eat up both time and dollars.

One of the major problems deals with the cost and timing of deliveries. Not much you can do about transportation costs unless you move your warehouses closer to both your receiving and customer’s locations. It seems that both manufacturers and distributors are analyzing these options to build or rent more warehouses where a high concentration of customers is located.

Another show I was listening to discussed how companies are “handling” the cost increases. They are:

  • Do not pass them on yet. Do so when they really need to.
  • Pass on 100% of the increases as incurred.
  • Pass a % of them on for as many years as it takes to recover 100%.

Let us assume many of your customers find themselves dealing with the five “reasons,” which of course could cause cash flow problems for them, and then cash flow problems for you. Consequently, tighter customer credit reviews and a weekly review of AR to spot problems before they get out of hand should be considered. To aid in this process you may want to calculate your Days Sales Outstanding at least weekly to see how the trend is tracking, and which customers are causing any increase.

After tracking all that is going on in the lift truck industry, the construction equipment industry, the rental industry, and the construction industry, I believe we are in this trick-bag for many years, and no matter what industry you are in there is a need to get more resilient if you hope to maintain your influence in your market area.

Let us face it. Customers will be in a state of flux financially, either because of customer problems or the direct impact of the five “reasons” or some combo of the two. Add on to that the price increases in equipment yet to come plus the higher financing costs lead me to believe dealers can expect pushback going forward when it comes to long-term leases with maintenance.

Thus, my title for this month’s column:


The construction industry and related dealer networks are diving in to cut the time and cost to plan, manage, bill, and complete the work in a timely fashion. These technology cap-X expenditures are making contractors more competitive and profitable compared to how they operated ten years ago. The same should apply to lift truck dealers.


Upgrading your technology package will allow you to reduce the time it takes to complete a project or daily work requirements. And any reduction in clerical work provides the opportunity to move employees into more meaningful jobs or to just adjust the number of employees. The sales, parts, service, and rental departments will also become more accountable to management to help cut costs or speed up production, which also helps offset pay increases given to employees to keep talent and offset inflation-related adjustments.


Planning and taking steps to manage a new set of business metrics and customer needs ensures that you will be one of the last men/women standing. From what I see OEMs are reducing the number of dealers they have. Why do they do that? To do more with less using their best operators to get the product into the market. If you can take your metrics into the HI-Profit status in the Disc Report, then I would consider your company to be one of the consolidators working with the OEM.

And we did not even start on the future of EV of forklifts.

One last comment about how banks are dealing this these five “reasons.” Not very well as far as I can tell. Meaning every dealer has to be prepared to comply with bank requirements and any current bank covenants. To walk into a bank meeting and get nailed for violations is not a good place to be. And if your balance sheet and/or free cash flow has deteriorated keep in mind that the new Least Accounting rules will add debt to the balance sheet which could put you in violation of covenants. More on this later.

And since costs are bouncing around so much, I thought I would include this formula for calculating selling price based on the cost of the units under consideration.


Cost = $10,000

Required GP = 35%

100-35 = 65 the divisor

$10,000/65= $15,384 sell price

$15,384 sell price – $10,000 cost =$ 5,385 GP

$5,384 /$15,384 = 35% margin

Stay in touch with customers and see where they are headed.

About the Columnist:

Garry Bartecki is a CPA MBA with GB Financial Services LLC and a Wholesaler columnist since August 1993.  E-mail [email protected] to contact Garry

Author: Garry Bartecki

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