Learning Without Scars
As a third-generation educator, it is easy to say that teaching and training are in the blood for Ron Slee. From his beginnings as a coach, through his time at McGill University, Ron developed a foundation for the work he does today. From working within dealerships, to operating a consulting company, creating a training business and running twenty groups, Ron has been directly involved in this Industry since 1969. Ron has been known as the industry expert for years, and has brought this expertise to bear through his training programs. Today, Ron provides specialized, job function based internet based subject specific classes, job function skills assessments, as well virtual seminars and webinars. These courses are designed for manufacturers and their dealers, as well as independent businesses in the construction equipment, light industrial, on-highway, engine, and agricultural industries through Learning Without Scars (www.LearningWithoutScars.com). This platform is a continuation of the work begun by Quest, Learning Centers which was established in 1996. This training is aimed at improving dealer parts and service operations through qualified people that are knowledgeable in using operational metrics and current market and operational best practice methods.
Learning Without Scars
Growing From Within
Are you constantly searching for new growth opportunities while overlooking gold mines within your existing business? In this eye-opening conversation with industry veteran Ron Wilson, we explore how equipment dealerships and service-oriented businesses can substantially increase revenue by looking inward rather than outward.
Ron draws from his 37 years of dealership experience to reveal several overlooked strategies that can boost your bottom line without acquiring new customers. We discuss creating specialist service technicians who command premium rates - easily 10-15% higher than standard labor rates - because customers recognize and value their expertise. This specialized approach not only increases revenue but positions your business as the go-to authority in specific service areas.
The discussion takes a fascinating turn when we compare labor rates across industries. Why are RV repair shops confidently charging $177 per hour while equipment dealers hesitate at $125? We challenge the outdated pricing models still used by many businesses and explore how "block labor" assignments - dedicating technicians to specific customers for a monthly fee - can create both predictable client relationships and improved administrative efficiency.
Perhaps most valuable is our deep dive into using data analytics to identify exactly where you're leaving money on the table. By examining which services current customers aren't buying from you, analyzing sublet work that could be brought in-house, and implementing strategic pricing models, businesses can easily increase revenue by 10-20% within their existing customer base.
Whether you run a dealership, service business, or any customer-facing operation, this conversation will transform how you think about business growth. Stop searching for what's over the wall when untapped opportunities are sitting right in front of you. Listen now to discover how to grow your business from within.
Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.
We provide comprehensive online learning programs for employees starting with an individualized skills assessment to a personalized employee development program designed for their skill level.
Aloha and welcome to another Candid Conversation. We're joined today by an old friend by the name of Ron Wilson and we're kind of contemporaries and we've been through the wars for most of our lives and both of us are quote semi-retired and learning how to do that. And today Ron would like to talk about how we can grow business from your existing clientele and business. Did I say that properly, ron?
Speaker 2:Yes.
Speaker 1:So good afternoon, young man, you're looking good.
Speaker 2:Thank you you too.
Speaker 1:What do you mean by that?
Speaker 2:Well, I think we're always looking for the next revenue growth opportunity and we always try and go outside and create something or build something, and very often that additional growth is already internally. We're just overlooking it for some reason and I'm not talking about efficiency gains, because that's its own bucket that we want to talk about at another time. But these are opportunities that are there. We're overlooking it for one reason or another, and by taking a step back we can identify we've already made the investment most often. So by taking a different approach to some current business, we can identify some revenue growth.
Speaker 1:I think one of the traps you and I were both in is that we're in such a hurry trying to keep up with what's going on. We don't really have time to look over the wall to see what's out there. Is that a fair characterization? Yes, yep to see what's out there. Is that a fair characterization? Yes, yep, yep, it's almost like somebody should be assigned that, maybe on a rotating basis. This month George does it, next month Frank does it. So what do they look for? What should they be trying to exploit?
Speaker 2:Well. So, for one example would be to take a look at the specializing some of the current general offerings. So, for example, in field service you have field service and every field service guy can go recharge air conditioning or repair air conditioning or troubleshoot hydraulics. What about taking the air conditioning and hydraulic troubleshooting as a specialty? So that will be an offering to be done by a technician. We did this years and years ago down in tucson we had one guy that was a uh senior technician, small field service truck, uh, extremely good on air conditioning, extremely good on on electronics and hydraulics. So he became the AC electrical troubleshooter guy. He's the guy that we call to on challenges to support a current technician but also to go out and focus just on those specific repairs only.
Speaker 1:So we take a guy who's a specialist and we take that labor out of the pool and have him create new business with his specialties. But we must backfill that hole right.
Speaker 2:Yeah, so you'd still have the general technician, but now the general technician is your general technician work and this specialist does air conditioning work and hydraulics. And since it is a specialist, there's more value into it and I think you can charge a higher labor rate.
Speaker 1:Yeah, yeah, exactly. So what, in essence, you're doing is your pool of labor is general technicians, and then you identify and almost promote specialists that can take advantage of their specialized skills at a higher rate.
Speaker 2:At a higher rate, and typically that higher rate is how much more do you think? Oh, you know, Ron, I don't know. I'd have to look at that, but I'd say it's an easy 10, 15 percent. You know, we've got a camper that we just sold because of the kind of just something we didn't want to do anymore, but the local camping place, RV place. Now this is for a pop-up camper. It's a tent camper, right? The ticket didn't have to have some repairs done on it. Their labor is $177 an hour.
Speaker 1:My goodness.
Speaker 2:And it's a terrible facility. There's no efficiencies in it. So I think sometimes in the equipment world we think that we can't charge as much. For some reason, especially in field service, we think we can't charge more than the shop rate. Well, I think you can. The customer's not having to haul the machine in the field. Tech can be dispatched 24-7. So I think there's some premium that we're overlooking on what you can charge in those kinds of situations.
Speaker 1:How much of that do you think is the quote the status of the service department in the business? Quote the status of the service department in the business that you know we're sales, rentals, parts, service administration, and sales and rentals typically don't understand what we do and when we are checking for labor rates we typically call around to the competitors to find out what they're charging so that we're in line and we're able to defend ourselves. But I've never felt that we got value Like the $177 that you talked about. You know how many equipment dealers in Arizona, new Mexico, Nevada have $177 as a basic labor rate? Not many, and hell if it's $177 for a pop-up with a basic shop I'm not going to say dirt floor, but pretty close. Why aren't we charging $200 an hour? So we've got that going too, really don't we? We've got the general labor rate and we're all happy if we get 65 to 75% and, as you say, we're working on efficiencies to make that better. But at what point do we become proud of what we do?
Speaker 2:Yeah, yeah, one of the projects, one of the last projects I worked on where I worked for the dealership, was a market-based pricing. And the concept from the VP that talked to me said Ron, if we improve the way we do in the hourly rate, if we improve our efficiencies which we should always be trying to do we're giving 100% of the efficiency gain back to the customer and we're not benefiting from it at all. Right, so he says so I want to share in that. So I want us to go for the efficiency gains and we've got things in process to do that. But I'm looking for what is a market-based driven price, and this happened to be on repair options, was one we looked at on rebuilds. But again, it's that market-based pricing and don't want to take advantage of the customer. But we got to make sure that the customer's getting additional value and there's no reason that we can't provide the support and earn a little extra as well.
Speaker 1:I'm still struck by the fact that market share-wise we don't get very good market share on maintenance. Very good market share on maintenance. We do reasonably well on rebuilds, especially when we get into replacement before failure, lifecycle management type stuff. But general repairs it's a struggle. In the old days we used to talk about wage multiples. You take the guy's wages, $20 an hour, multiply it by three, you're going to charge $60 an hour. You're going to get 66% gross profit. Congratulations, and everybody was happy. That's almost 50 years ago now and the world is a hell of a lot different place today with technology and ceramics and everything else that goes. But I don't know that we've changed our mindset on wage multiples. Have you seen that or are we still stuck on that?
Speaker 2:Yeah, I have not seen that. I'm going to guess we're still kind of stuck on it. I've not again been away now four years, but my guess is that we're still in the kind of the same mode we've always been, unless there's some dealers out there that are doing it a little bit different. But but for the most part we have an hourly rate and we we're bashful about, uh, promoting ourself and and sharing our value that we bring to the marketplace.
Speaker 1:Yeah, it's funny With COVID 2020, let's call it and coming out of COVID now at 2025, there's nothing that I find out there anywhere that hasn't had dramatic price changes except us. Yeah, yeah, how do we break that logjam?
Speaker 2:You know, if you look at the on-highway truck dealers and what their labor rate is compared to a machinery technician labor rate, I was really amazed at how you could have. The same customer has a fleet of concrete trucks, cement trucks that will pay $150 an hour because in the shop that's what the market price is for on-highway trucks, but yet he's going to pay $125 or $100 an hour having a machine fixed. It's just really out of alignment.
Speaker 1:MIKE GREEN. Yeah, if you look across industries forestry, mining, material handling, crane and hoisting engine, marine all of them have considerably different approaches to labor. So you know the reason I'm spending time on this is your specialty, your specialist troubleshooters. That might be the avenue that we want to follow to break the logjam. We have a hydraulics specialist troubleshooter, electronics we have engine, we have powertrain, et cetera, et cetera, and each of them has specialist rates that maybe are multiples of five or six times wage and we shrink the general technician pool accordingly. Does that make any sense?
Speaker 2:It does and some of the customers, if they know that that one technician's coming out, they'll pay more.
Speaker 1:Of course.
Speaker 2:I mean, they know, and they know, the guys, they know, or the women, they know who it is, and and and, so it's yeah. So we so often think we're under seller value.
Speaker 1:So let me look at France, and you know I started up in Canada and Quebec and we've dealt a fair amount with France. At one point in the 70s, béjarat Mauveur, the dealer for the country of France, had one technician in the field for every 20 machines. That technician was responsible for those 20 machines with those customers period. So if a customer had a problem they called. If the guy was already busy, he had access to somebody to back him up, and rarely did they have two out of those 20 that were in problems at the same time. It was phenomenal. Just think about your machine population in Arizona, for instance, and divide that by 20, how many technicians you'd have. That'd be a hell of a lot more than you currently have, right?
Speaker 2:Yeah.
Speaker 1:And then in the 80s they got rid of it and their market share in labor went poof, surprise, surprise. What do you think of that approach? Taking specialized customers and assigning a technician to them? For instance, you've got a mine that has 50 machines of various models and sizes and you say, ok, here's three men. I'm going to give you those three men. They're going to be on your job site every single morning at seven o'clock. They're going to be there until five o'clock and you can deploy them. Think we could handle that.
Speaker 2:Absolutely, we did that. We called it block labor, so we had a labor rate to the customer and so basically the technician was 100% utilized at whatever the labor rate was. He was assigned to that customer 100% of the time. We had them assigned to pipeline companies. They go across from Texas to California. We found the pipeline with those same guys. We had to rotate them in and there's some things to be careful there because sometimes technicians get too close to who they're working for and then the gossip kind of starts happening, the rumors and kind of things, and it kind of causes some issues there. But it's a great concept and it really takes the pressure off of that one, usually a very large customer.
Speaker 1:Did you do the invoicing on a work order basis or was it on a month basis?
Speaker 2:It was on a monthly basis. Their time was logged and we still kept track of what they're working on. So second operations was still there, but it was a monthly invoice that was billed to the customer.
Speaker 1:So the whole administrative thing became easier.
Speaker 2:Oh, much easier Less costly.
Speaker 1:So the office piece of expenses which, if I remember right, was somewhere administratively, is about 20% for other salaries and wages rather than wage, that's cut in half. You're getting another five points right there.
Speaker 2:That, and then the receivable timing decreases because they know what the rate's going to be. It's this flat rate for this month, and so getting it through payables receivables is much, much quicker.
Speaker 1:Plus shop supplies, specialized tools, facility costs, all of those things go. It's a hell of a concept. I don't know why it didn't catch on more broadly. You know, road, where you were, was a rather progressive dealer. There was a bunch that were, but not everybody. And so how do we end up? It was surprising to me Bill Blackie and you and I were both there when Blackie was the chairman, with his parts scram and service scrams. He was a maniac for process. We seem to have lost that. Is it something that we need to have? Somebody in the service department that is constantly looking at continuous improvement?
Speaker 2:yes, absolutely yeah, and I don't think that's one of the challenges and I think it could be another discussion is who sets service pricing? Is it service manager? And our experience was that's not the best place to set pricing. It should not be done by the service manager, the service department. It should be done by a pricing team that understands the philosophy of setting price and has got the expertise and now they work to the service manager One. They'll cover every dollar they have when maybe they shouldn't or they may not cover enough. So when you take the setting the service price out of the service operation, now they're involved in the rebuild and how many hours it takes and what's involved and reuse the parts, all that they're involved in that decision, that input to make that decision, but that's, I mean, that's kind of a total different topic. But who should set the price for service offerings in the service department?
Speaker 1:I think you bring up another great point that parts and service. Let's just leave ourselves there. Parts and service let's just leave ourselves there. The parts department is basically a warehousing, inventory, purchasing, selling group. The service department is repairs, maintenance, rebuilds group. We can throw inspections in, but both of them have a need for business management. Both of them need to have process improvement management. It's almost like we should strip the department down into here's the customer facing and here's all the support that's required for that. Does that make any sense?
Speaker 2:Yeah, it does, sure Yep. And you need the experts in how to manage a process improvement. I mean you need to have the expertise in Six Sigma or whatever methodology you're going to use and setting price. I didn't so when I was asked to take on this new role of setting service pricing. Well, that was new to me. So I bought every book I could find about setting pricing. Well, there's a whole career out of that.
Speaker 1:Yeah, you got that right.
Speaker 2:There's a whole science out of setting pricing.
Speaker 1:Yes.
Speaker 2:So I think there's a lot that dealers can pick up from what is outside the dealer network on how to manage a business in different areas, and that we can learn and grow and improve. We provide the customer as well as improve the dealership.
Speaker 1:We're getting into a bit of a trap now, Ron. In the last 40 years we've seen a 50% reduction of the number of dealers competing in the marketplace about every 20 years. So if we started in 1975, or 85, I guess, is the right place at 100 customers, 2005, we're at 50, 2025, we're at 25 customers, and it's not because the dealers didn't operate well, but they didn't manage the business well and they got themselves into trouble either too many machines on hand and interest rates got them, or market changes got them, or various things. But the leadership's happy because sales revenue went up. That's how they measure their performance and that's a trap.
Speaker 1:And if it continues on another 20 years we're going to be down to 12 dealers, At which point the customer is going to be looking at the Walmart model and the Amazon model and a different approach, and dealers might be at risk. Yeah, and I don't. I don't see anybody with their hand up saying hey, wait a second, We've got a problem here. You've got some pretty sharp people at road today. You've you've got a what? Three generation dealers-generation dealership, successful going forward in the past, Strong customer support, strong customer retention, but there's not many Caterpillar dealers anymore.
Speaker 2:Yeah, empire's been very fortunate. One is that they've had an upper-level management that has been very outside the box, very creative and looking ahead, looking down the future, the big meeting room and we're going to be there for a week and and the director of service at that time he said, back up against the table, on back table, on the wall, there's a binder for each of you, that's your new role. So he took and shuffled the entire service operation. Oh my so. And he had the whole plan in there.
Speaker 2:Here is what the challenge is, and he'd done his research. Here's the challenges, here's what you're faced with. Here's what I want to see some improvement in these areas. I mean, it was a whole deck was shuffled right then. Now, what an interesting learning curve. We were all and we're all in the same boat, I mean. So we're all taking this, our new roles on, relying on those that were there before and that were still there, just had a different role to ask for help and guidance. But we could bring in some new ideas and new approaches. But Empire has been very, very fortunate having people a few people, thinking outside the box and looking way ahead.
Speaker 1:Was that their primary job function?
Speaker 2:Yes.
Speaker 1:Looking at the future.
Speaker 2:Well, no, this person was a director of service.
Speaker 1:So do you know what he went through to come up with those books? Did he do it himself, or did he do it with outside help, or how was it put together?
Speaker 2:He had a admin staff on the service side that had one person took care of the mining contracts and one took care of he would pick the phone up hey, I'm looking at expenses in this area. What's giving the breakdown? So he had a service admin staff that all service managers had access to them as well, but he, of course, he had his own things he was looking at to build his roadmap.
Speaker 1:So the service managers then? In that context, they were driving the labor, they were driving the repairs in the shop and in the field, scheduling it, closing it, doing it with good quality, doing it with good efficiency. That was their job, right? So your point about finding additional work from the work we have, it's kind of rooted there, isn't it?
Speaker 2:Yes, yeah, so it's all the information's there. For example, the next piece I want to talk about, ron, is identifying those areas that you're not doing business with, with a customer. So, for example, you've got a customer that he's rebuilding transmissions with you but not engines. He's rebuilding hydraulic pumps and motors but not cylinders. He's rebuilding hydraulic pumps and motors but not cylinders. So, diving into those, well, why are we not doing his engines? Well, he's found someplace cheaper and they all think they can rebuild an engine. So are the hydraulic cylinders? Anybody can do a buff and stuff cylinder and put it back together. But those are areas. Again, it's a business, a group of people understanding their market and doing the deep dive into the data and pulling out the information and sharing it back with the service operations managers. The managers can implement it if they know what they should be looking at.
Speaker 1:Yeah, what you're talking about in my jargon is we are still in a transaction world. We should be in a data world. So you know, what we get is fine. What we don't get is even more important to me and to you, based on what you just said, yeah, and then finding out why we don't get it, and more often than not it's price. But more often than not I can kill price with than not I can kill price with. You know, I'll give you a three-year warranty. The other guy is going to go out of business if he has a failure. He goes blip near, he's done yes, yep, yeah, there was a.
Speaker 2:So I was in a role as in marketing and I was. I was a data analyst in marketing. Now that was that was new. That was a new role. So you had one individual who took care of the traditional marketing, the events and brochures and all that kind of stuff, and my job with the team was to take all the data points, all the information in the organization and do data analytics on it.
Speaker 2:So one of the things we did was the abandoned shopping cart so I could take a look at anything, and then one of our competitors and then sometimes they would provide a model serial number so I actually knew what machine they were actually building an engine rebuild quote on, pull that out of the lost sale and get that to the salesperson. If we get it early enough, then we could possibly we're back in into bidding on the job or quoting on the job or back in the deal again, but we could go. Every month I provide a report on the kind of parts we were selling to our competitors and, and especially kamatsu, they've got a very good part number six system, that a good parts guy. Look at that part number, tell you what it's part of yeah, so you can easily break it down. Okay, these are engine components, these are powertrain or hydraulics, and so you kind of know what your business, you're not getting, and what they are getting yeah, with with data analytics today, ron with life cycle management, and we.
Speaker 1:We've got so much available to us today in the form of data, but now I get worried about the accuracy, you know. You know we've got the job code, the standard SMCS code swoosh now or whatever and John Deere had the SPG and Komatsu's got a similar circumstance and John Deere, believe it or not, stopped collecting all of that dealer repair history. Agriculture hadn't been doing it and didn't want to do it, and agriculture got the upper hand and all of a sudden the industrial side didn't. That was gold, you know. So I'm going to change.
Speaker 1:One of the things I used to do and maybe you did a similar thing is any machine that was in the shop that didn't have a Caterpillar filter on it. I changed the filter. I call a customer and say I'm going to give you a free filter, and nine times out of 10, the customer didn't have their maintenance done by us. They had an independent do it and the independent didn't know what filter to change. So whatever the filter was that was on there, that's the one they used. So it got me all kinds of additional business. It was stupid, but it's just that kind of thing. So we need the data analytics. We need to go to what they don't buy from us, find out why. How do we combat it? We need to create specialists based on the business that we have and try and set ourselves further apart, create a stronger base from a general technician perspective, price-wise In other words, be a little bit more proud of what we do. That should very seriously impact income. Yeah, 10, 15, maybe even as much as 20% per year.
Speaker 2:Yeah, yeah, another area we take a look at sublet. So if you look at all of that stuff that we've sent out to do, sublet wise is go back and pull all those POs and what kind of work that's being done and which of those can you pull in-house and turn that into a revenue on what we can make as a service transaction. So identifying so if you look at on the first one of those categories, I call the first off and last on. So if you're doing a rebuild on a machine, the first thing you take off that machine radiator could be a cab or it could be a dozer or a ripper and that's the last thing that goes back on the rebuild. Those are the kinds of things that we need to take a look at.
Speaker 2:Are we sending it out to Sublet? It could be another branch store that maybe is low on revenue right now that maybe could do the cab rebuild while the main shop does the main shop machine rebuild. Okay so, but that first on and first off, which of that? Then you get some transportation time you can take care of, turn time you can take care of or send out to sublet. Bring that back in-house as a revenue source as well.
Speaker 1:I used to assign a part number to a sublet so that I could identify how frequently I used that sublet and once we got to a certain volume I refused to let it continue to be a sublet. You do it five or 10 times, not for this nonsense. Why can't we do that? Ourselves Did the same thing with tooling. I put tools into the parts department. How often did we have a tool crib in the shop? You go to get a tool and the damn tool wasn't working Because the guy who put it last in there I never knew who it was. But if I had a part number on there, all of a sudden I had a tool charge. Instead of a parts return percentage, I had a tool usage percentage. It's remarkable how such simple things can make such a big difference. Like you said, first off, last on, Really, you know, in the 1990s I think you and I have talked about this there was a thing called BMW augmented reality, where a technician walked up to a car that had the hood up, His toolbox was on the right-hand side and on top of that was a pair of glasses, and this was about 1993.
Speaker 1:He picked up the glasses, put them on and pushed a button on the arm and all of a sudden, the inside of that engine compartment lit up, First step. And it talked to him. And then it showed a diagram, it showed a graphic of what was going to be. You know, take off the radiator hose, take off the filter, take off the whatever. Here's the specs, here's the torque, et cetera, et cetera. That's today, that's 30 years ago. We can get on a plane, go to 100 dealers, I bet you.
Speaker 2:We don't find two that have that, no, but it's coming very fast. We're the tipping point now. If you look at ai, we're the tipping point now. It's going to ramp up quick and I don't know how people.
Speaker 1:Yeah, we're going to be in trouble because I don't know how many people are going to be able to keep up with that. Yeah, that's the other thing that's happening out there. The number of skilled people that are available in the marketplace I was watching something with Mike Rowe the other day there's, I think at the time there were 7.2 million job openings in America and there were 6.7 million men 25 years and younger that were not looking for work or not working. What in the heck is going on? School is not delivering the product that it used to.
Speaker 2:Yeah.
Speaker 1:I don't want to get down that rabbit hole of being negative, but I think what you're bringing up that look at the data. What don't you get? Why don't you get it? Let's go after it. Look at areas where you can create specialists, have them be troubleshooters, apply those skills, different labor rates and start paying attention sublets, other things to the details. We've already got it, but it means the service management job has to be supplemented with something else a business manager, a data manager, whatever it is. Is that a good conclusion to come to?
Speaker 2:Absolutely.
Speaker 1:I think this is something everybody should pay attention to. I hope those that have been listening can see this. Ron, how long were you involved at the dealership? How many years?
Speaker 2:37 years.
Speaker 1:Yeah, and I was about. Well, I was in dealers for 13, but involved for 50. So you know we got scars. That's why I call the ring without scars. I got scars on my backside. We don't need other people to do it. I hope everybody who's been listening gets something good from this and, ron, I really appreciate you sharing your wisdom with us today. Any comments you want to put in as a close.
Speaker 2:No, I can't think of anything. I think we just have to be creative and look outside the box and rely on those that have the experience and the knowledge to help with the data analytics and help them tell the story.
Speaker 1:And implement it. I think that's a great close. So again, thanks very much, ron Mahalo, and thanks to everybody who's here. I look forward to being with you at the next Candid Conversation, mahalo.
