Garry Bartecki Things are happening
I hope you took advantage of the JOB SHOCK comments prepared by Edward Gordon I referred to in last month’s column. Be sure to share it with the younger members of your family, especially those close to entering the job market. Dean kindly attached the article to the MHW website to give you access. And after reading it you may find yourself saving some money. I am not going to get into the details here because you really need to read the entire article and pass it around to those you feel may benefit from the information. What is currently available is Part 1 of this story and I will make sure you have access to Part 2 and so on as they become available. What is discussed in JOB SHOCK will impact both your personal and business world.
What else is happening is that interest rates are starting to increase along with a weaker dollar. Not good for highly leveraged companies, especially those who import their product line. And who knows how these metrics will move once the Stimulus money hits the streets. Since there is no time like the present it may be prudent to spend a little time thinking about interest-bearing obligations, banking arrangements, and how competitors without the import issues will impact your business.
If the dollar value increasingly gets weaker there could be pushback about equipment pricing. I was thinking about this and wondered what I would do if a major customer were negotiating a $1 million dollar transaction, and as you were about to close the deal, he/she say they plan to pay with Bitcoin? Think about that, because it is entirely possible for a large transaction to fall into this arena at some point and you need to be able to handle it or maybe lose the deal to someone who can execute with Bitcoin.
Maybe your OEM should put together a white paper about non-dollar transactions. Could not hurt and you would have another value-added cookie to offer up. Is your vault big enough to handle 20 Bitcoin (only kidding)?
We all probably spend time trading or investing in stocks, and if you do you probably pay attention to the Q4 and year-end financial reports related to your portfolio and the industry you are in. I was just doing that last week when I heard three reports: one from GM, one from Ford, and one from JLG. All three noted that they have definite plans to switch to products using cleaner energy…..electric vehicles. I was most surprised concerning construction equipment, but it is happening. It appears that advanced battery technology is taking the front stage with these companies investing in this technology. What does this mean for you? Plenty.
Based on what I have been hearing the demand for electric lift trucks using lithium-ion batteries is sure to increase above the norm and as a result will change many aspects of your business. Inventory investments will probably increase because you must maintain inventory to cover more and more for the electric business while also maintaining inventory related to lines or products you had pre-electric. Could be a substantial investment because battery technology as of today is not cheap. And part of this inventory issue may deal with non-electric used units coming off rent that may not be worth as much as you planned when the original lease was put into place. Technology and training will also add to your cost to own and operate this type of equipment.
The major planning issue regarding battery technology is having the right partners to help carry the load and make the transition. There are only so many “partners” out there to work with. So, the sooner you find who you want to work with the better. OEMs should assist with this process.
The American Rental Association (ARA) offered up a webinar entitled Rentalytics that was quite good. It was scheduled for 60 minutes which turned out to be 90 minutes. They covered how OEMs, rental companies, and end-users see ’21 and ’22 unfolding. Three industry experts and economists also provided estimates regarding the Cap-X spend in ’21 and ’22. This Rentalytics is somewhat new to me but offered up projections and estimates that were of interest. They even had a section on the material handling industry and expect 4% growth in ’21 after being down 4% in ’20. Not bad compared to other types of dealers or rental companies. On the OEM front, the Manufacturing HMI index expects a 6% increase overall in ’21, with durable goods at an 8,5% increase and non-durable goods at a 5.8% increase. Again, not bad.
It seems your business life will keep you hopping over the next couple of years. Time to get things under control and plan for the coming changes.
Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail [email protected] to contact Garry
