This is probably one of your most crucial planning opportunities to improve margins, operating profit, and free cash flow as a result of AI adoption, system upgrades, new services offered to present and potential customers, and new business opportunities related to manufacturing and warehouse systems, which include robots that can help reduce costs and improve productivity. There is no doubt that we are in a use-it-or-lose-it situation.
Financial and operating department heads will need to study the current situation, review current operating and cash flow results, and identify potential changes and upgrades that benefit both the company and customer needs.
Based on the people I talk to, there is no doubt that business practices are improving and changing faster than most management teams expect. Believe me when I suggest that conversion rates are moving faster than you think, which means managers need to review their current operations with the intention of improving operating results in 2026. Investigating potential new systems and preparing budgets to cover conversions are part of the Q4 work expected from each department head. Hopefully, part of this process involves the OEMs in finding suitable systems or means to improve both the company’s and the customer’s needs.
OBBBA
One area to cover is the benefits and drawbacks associated with income taxes. ABBBA should be reviewed with a tax expert familiar with your industry. I would expect comments and suggestions that cover transactions reported regarding your company and the impact on customer transactions. Management should be aware that specific provisions of the Bill have associated timelines, which could have significant negative consequences if the required dates are missed. I want to request a written memo outlining the steps necessary to maximize the benefits. This memo should be drafted in a format that can be used by customers as well.
Believe it or not, state and local tax requirements are changing in response to federal changes. I would suggest finding a state and local expert to provide a memo to your CFO, which both the sales staff and customers can use. This is important and very tough to fix once a transaction is complete.
A group of dealers selling similar products may want to spread the cost of preparing the federal tax memo, but also cover the states where members of the group are doing business.
Need help with the tax review? Let me know.
OPERATING OPTIONS
I suspect some of you think I am going nuts based on the recent columns I provided to Dean. I assure you that is not the case.
I believe that dealers and OEMs will need to adapt to the changing business environment if they are to remain competitive with their product and service lines.
I began with the Performance Gap discussion, which I firmly believe will have a significant impact on any dealer that fails to identify the necessary changes to remain competitive in their market. The conclusion I expect is dealers who invest and take steps to improve operating profits, compared to management teams that do not feel the need to, will find that the vales of their respective companies will development a “spread” to the point where those that choose not to improve will find themselves with a company not as valuable as the dealers that invested in AI, Systems, Marketing Plans and programs that assist customers with making similar changes. The bottom line here is that the sooner the weaker dealer sells, the more they will get.
If you need some help discussing this topic, let me know.
I also offered a suggestion regarding GAAP accounting versus a more critical metric, such as Free Cash Flow. Note how FCF is now being used more as a measuring tool for public companies.
FCF is the cash available after you pay all your bills. It will cover transactions related to both your income statement and balance sheet. What is notable about FCF is its ability to calculate FCF not only for the company but also for individual customers, products, revenue silos, and so on. It would be nice to know what you are making for each customer on your list. Or what product lines are producing the most?
Speaking from personal experience, I was working with a company to address its cash flow needs, and as a result, the bank involved requested a 13-week cash flow statement to compare the actual cash flow (or outflow) with the budget provided to the bank—an interesting exercise.
FCF will also help you avoid trouble by showing you can pay your bills on time.
Next, I went nuts with the potential changes required, such as AI, Tech Systems, and New Revenue Silos related to customer needs, especially related to manufacturing and warehouse systems. And let us not forget our robot crew that will require training and maintenance to keep them up and running.
The more I read and listen to various business sources, the more I am convinced that these changes are occurring and happening faster each month. NO DOUBT ABOUT THIS!. More reasons to plan, budget ahead, train ahead, and stay competitive in your territory.
I also want to reinforce my earlier comments that lift truck dealers will need to be in the Robot business if they wish to remain competitive. I am preparing a list of both systems and robots to allow dealers to meet with and partner up with system and robot manufacturers.
BOTTOM LINE
The Bottom Line here is that the dealer business is changing. As a result, operating metrics will also change. I can envision staff reductions, the creation of new revenue silos tailored to customer needs, new partnerships with system and robot manufacturers, and the development of new customer relationships resulting from the implementation and maintenance of customer equipment.
The result will be a new set of company metrics to compare your work against. Staff will be reduced. New revenue silos will appear. Gross profits will increase. Turnover will increase. Tech costs will increase. Training costs will increase. FCF will increase. In other words, your operating results may not compare with former industry standards. In the end, AI, Technology, and Robots will increase profits and cash flow, which in turn increases the value of your company (and that of any poor-performing dealer you purchased).
I plan to delve deeper into this topic. But for now, time to take a break.
About the Columnist:
Garry Bartecki is a CPA and MBA with GB Financial Services LLC, and a Wholesaler columnist since August 1993. E-mail [email protected] to contact Garry.
