Review of the "Eight Axioms for Used Equipment Management Success"

Review of the "Eight Axioms for Used Equipment Management Success"

On page 119 of Walter J. McDonald's book, Achieving Excellence in Dealer/Distributor Performance: How to Increase Profitability, Cash Flow, Market Share and Customer Retention, Walter writes about how dealers and distributors suppliers should think about their used equipment sales. Let's break down all eight:

1. You Must Buy it Right
Make rational business decisions based on reality, especially for appraisals and setting wholesale valuations. 

This is a self-evident axiom. Everyone knows in real estate that it's all about the timing you purchase a property. That counts just as much as the upside location of the area it's in. Over time, if you have negotiated a good deal on the property and the area is generally getting better, you are almost guaranteed to profit from the sale unless the economy happens to be in a fast decline.

The "buy it right" idea in equipment is the same as real estate. The most profitable machines are those a dealer is able to purchase used for a good discount, rent reliably for a few years (few maintenance issues), then sell it at or near their acquisition cost - that's a sweet deal!

Unfortunately, many equipment rental companies get caught up in a hot economy and load up on debt when they have more rents coming through then they can cover. In the market-grabbing intensity of a hot market, it is hard for cool heads to prevail and keep debt levels in check. When a downturn hits, even a slight one, this can cause over-leveraged equipment rental companies to have too many units on their yard not making any rentals (aka money).

When a downturn hits, it is even more crucial to have purchased equipment at a good price. If a company needs to shed assets to stay afloat, it is easier to do so when there is not a big gap between acquisition costs and resale valuations.

Alternatively, a downturn is a GREAT time for companies with good cash on hand to pick up excellent deals on equipment. In a downturn, the best-run companies buy up many great assets for dimes on the dollar, and even other equipment rental companies who want out. For companies who manage their debt and cash well, a downturn is the best time to "buy it right."

2. You Must Run It as a Profit Center
Can't serve as a cash trap or loss leader. Tightly control reconditioning costs and time to front-line-ready for sale.

Used equipment sales should play an important role in any equipment dealer's revenue stream. The better a dealer is at selling their used equipment for retail or wholesale valuations at the end of its useful rental life, the more confidence the company will have to buy more inventory, and the cycle repeats. Alternatively, if a dealer is forced to send their machines to auction at the end of its useful life, and incur 15% commission costs + freight on low valuations, the less confidence they will have to buy more inventory.

Selling used assets for top-dollar and minimal commission at the end of their rental life is how the best independent equipment dealers operate.

Mr. McDonald also points out: "Tightly control reconditioning costs..."

This is a key point. Reconditioning costs can quickly exceed the time and cost budgeted if not properly managed. To some mechanics, replacing one older part naturally leads to another, and another, and another... until the entire section has been replaced. This increases the reconditioning cost if not tightly controlled.

Increasing the reconditioning costs out of the original budget means that the supplier will likely not get that value in resale. If the price of a reconditioned machine is too close to the cost of new (say 75% of OEM cost), then a buyer will just buy a new machine with a warranty and better financing options. If a reconditioned machine is priced at half (or less) the cost of new, that could be seen as a great deal for the buyer. A supplier can afford to price the reconditioned machine at half the cost of new only if they have controlled their reconditioning costs well.

3. You Must Know the Used Equipment Market
Update values semi-monthly, preferably weekly from your national network of competitive dealers.

EquipmentWatch data is a great service to sign up for to regularly update the valuations of your fleet. EquipmentWatch has the most tracking bots across the web for the best auction, wholesale, and retail machine valuations by make, model, and year.

If the cost of EquipmentWatch is too costly, then check Equiprent.com and around the web for the most recent competitive pricing on your machines.

An equipment dealer can drive the highest valuations on their assets by selling retail in their local market. This is done by knowing your customer's needs well and doing sales demos of the machines. However, all customers check online to understand the make, model, and pricing of the unit(s) they are looking to buy. Everyone has an abundance of choice at their fingertips.

If machines do not sell locally that are at the end of their useful rental life, then Equiprent.com is an excellent place to list them. For heavy machine sales through Equiprent.com, a dealer only pays a commission of 5% upon sale, instead of 15% commission to auction houses. The dealer also does not have to pay freight to an auction house, and can likely sell for a higher valuation (wholesale value) then bottom-dollar auction value.

4. You Must Run Effective Promotions
Used equipment can be sold anywhere. Build your list, do email promos. Exploit your website.

This is exactly right! It is far more profitable to run effective promotions to avoid sending machines to the auction house at all costs.

On Equiprent.com, suppliers can run a pay-per-click campaign to feature their "hot list" assets on the top of the homepage and/or feature their storefront on the homepage. Suppliers can also run their own specials for free which appear on the bottom of the homepage on a carousel.

By running a pay-per-click campaign through Equiprent.com, suppliers are getting highly-targeted (serious) buyers, and only paying for those who are curious about their product.

For the first suppliers to signup, they can list Featured Products and be a Featured Seller for free.

5. You Must Manage Used Equipment Prospects
Usually they are very different accounts than new machinery customers. 

Used equipment buyers are typically contractors and small, independent rental companies who look to get the most value and life out of their assets. There are also many "junkyard dogs" who prefer to buy many of the same type of 20 year old machine to harvest parts to use to keep only 1 or 2 units running.

There are different value mindsets for a new equipment owner, compared to a second-hand owner, to third-hand owner, to forth-hand owner. Each buyer looks at machines differently. While a warranty might be very important to a new machine buyer, used buyers know machine sales are "as-is, where-is." However, all used equipment buyers are interested in the accuracy of the machine's description.

If the supplier is misleading the buyer about the condition of the machine, they are taking advantage of them. Even if a machine needs a significant amount of work - there's always a buyer who will be willing to purchase it for the right price. After all, even badly damaged machines still have parts intact that are usable.

This is the reason why Equiprent.com has a 3 business day buyback guarantee on all used heavy equipment sold through the marketplace. A buyer has 3 business days to inspect the machine after the delivery date. If the buyer finds that there are issues with the machine that were not advertised, they can make a claim with the supplier. If the supplier and buyer ultimately cannot agree, the buyer ships back the unit and is refunded the purchase prices (less wire fees and freight expenses).

To head off these problems before they happen, buyers can message any supplier directly through Equiprent.com. All messages are tracked in user's dashboard so both parties have a record of what was discussed.

6. You Must Manage the Used Inventory
90 and Out! "Bundle" high and low margin units to clean out old inventory for less impact on monthly budget.

Mr. McDonald is saying that dealers/suppliers should prioritize the speed of transactions in used equipment sales, and not sit on used inventory waiting for the "perfect" offer. We agree. Keep the machines flowing in and out and manage all aspects of the their acquisition costs, rentals, maintenance costs, and resale valuations.

On Equiprent.com, suppliers can offer quantity discounts on any product line, and always have the option to negotiate a deal directly with a buyer by messaging through the platform. In those cases, suppliers can set a one-time discount that expires the next day so that the buyer can go in and make the purchase.

Get the highest value the market is offering you and keep moving!

7. You Must Manage the Sales Effort
Prospect. Website. E-promotions. Tele-prospecting.

Retail sales in your market are the most profitable, so you should have a dedicated sales team to growing that account base and pay for local SEO to appear first in search engines.

Equiprent.com acts as your e-commerce solution to selling your products nationally. We built the interface, PayPal payment system, and dashboard tools to make selling your products plug-and-play. Our data entry team also helps upload an Excel spreadsheet of the make, model, serial #, unit #, description, price, etc. of all your products, as well as your pictures and videos. We can also setup your unique storefront, taking the information you already have on your website.

You are able to review your products and storefront before go-live, and the entire process is FREE until a product sells. You only pay for upside sales, and we only make money when we help you sell.

Minimal setup time and no cost to list with Equiprent.com - not a bad deal!

8. You Must Use Management Information Tools
Over/Under Report, Prospect List, Auction Schedules, Upcoming Available Rental Units, etc.

Your internal ERP system generated reports are critical to managing your time, fleet, and people. There are many good ERP providers, and virtually all of them have useful automatic reporting tools.

What we're interested in helping you with at Equiprent.com is selling more parts and machinery! On your Supplier Dashboard you have these reporting tools available:
  • Top 5 Most Sold Products by Volume
  • Top 5 Most Sold Products by Revenue
  • Sales Trend Over the Past 12 Months
  • Conversion Rates Over the Past 90 Days
These reports are designed to help you manage your overall selling strategy on Equiprent.com: product positioning, pricing, and current offering.

Instead of building out your own e-commerce website or paying thousands of dollars in listing fees per month, all you need to do is manage towards these metrics to maximize your e-commerce profitability. Whether you are selling many small tools and parts, or a few large machines, these are important metrics to track.

Thank you for taking the time to read this review, and we look forward to serving you on Equiprent.com!


The Eight Axioms for Used Equipment Management Success is written by Walter J. McDonald in his book, "Achieving Excellence in Dealer/Distributor Performance"

The book is available for purchase on their website:
https://mcdonaldgroupinc.com/achieving-excellence-guide


Luke Powers
Founder & President, Equiprent.com
luke@equiprent.com

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