What If Data Made Your Next Sale Obvious

If your sales plan still depends on a rep’s memory and a “black book,” you’re not just risking missed deals, you’re building randomness into your margins. We sit down with Nick Mavrick to make the case for a more disciplined approach: give salespeople a vetted weekly list of buyers with a real probability of action, then run that list through a measurable, closed loop sales funnel. When the inputs get better, the outcomes stop being luck. 

We dig into the math behind predictable selling in construction equipment, rentals, and product support. Why does “spray and pray” outreach often land around a 1% close rate? How can higher-quality data push that toward 6% or more? We also unpack why commonly used sources like UCC filings can be a misleading proxy for true market demand, and how tracking funnel stages from contact to quote to negotiation turns a pipeline into something leaders can actually calibrate. 

From there, the conversation widens to the pressure dealers and OEMs feel right now: consolidation, softer markets, flooring programs that shift cash pain into the future, and the massive market power of large rental companies. Our answer is focus. Name the small set of accounts that drive the majority of revenue in each geography, roughly 15 for a rental store and 45 to 60 for a dealer territory, then align incentives and effort around winning and keeping them. 

We close with practical ways to map market share by store, salesperson, and department, plus a simple truth: specificity builds trust, and trust makes change possible. If this sparks ideas for your team, subscribe, share the episode with a colleague, and leave a review. What would you cut first to “starve the noise” and focus on your best accounts?

Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.

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Transcript

Welcome And The Prospect List Idea

SPEAKER_01 0:00

Aloha and welcome to another candid conversation. Today we're joined by NIF Maverick. And those of you that follow us on our website and our blogs know that Nick has been um published the last two weeks in a row, he has one more coming. And and that's what I'd like to talk about today. It it seems a little radical in the world, but being able to provide somebody a list of prospects, customers for the coming week that have probability of activity rather than relying on the black book, I think that is absolutely brilliant, absolutely overdue, and that's what Nick's talking about. So I'd like to get Nick to get on record a little bit more, and I'd like all of you listening to pay a little bit more attention than normal because this is what we all need to do, not tomorrow, yesterday. Nick, I just put a big ball in your back pocket.

SPEAKER_00 1:07

Well, all right. Well, first of all, I have to say thank you for being a constant blessing. And um thank you for the opportunity to continue to learn from you. Uh, not only do you fill in many things that I don't know, but you give me and our company courage to uh to refine and adjust and continue to serve uh the industry. So thank you always. Welcome.

SPEAKER_01 1:33

So what do I do here? You you talked in one of your blogs, we're gonna give a salesman a list of custom 25 customers for next week. Yeah. What do you what you what are you talking about? What do you want him to do?

SPEAKER_00 1:47

Well, and please give me direction to adjust. So you and I have talked about um one is you you call it the black book, is the it's an interesting uh the the construction

Why The Black Book Fails

SPEAKER_00 2:05

equipment industry should have bigger margins, broadly speaking, than it does. Um dealers have uh very compressed margins. Rental companies, uh, to the extent that they're in specialty, have much better margins. But in many instances, folks that are in the construction equipment and industry, whether they sell newer used, they rent, or even product support, are not necessarily given a directed list to run their day. And it results in this vicious cycle of uh vast cyclicality. Uh, it results in compressed margins, it results in uh turnover, um, dot. And what the industry uh when it doesn't properly support its salespeople has a pernicious effect on the entire enterprise. A lot of those industry salespeople are one given they have their black book if they're uh blessed enough to have experience in the industry. If they're starting brand new, they're vastly under-supported. And if they don't sort of miraculously achieve their quota, then they're turned over and replaced by somebody new. What we've aimed to focus on is common sense at scale. So we uh take a company's data, uh, whether it's their own data or uh data that they need, and we complement it both by filling in missing pieces in their data and also providing them a tool that gives them a closed loop. Specifically, if a sales guy, if you look at the law of small numbers, a good year for an equipment sales uh professional might be 25 machines a year, right? You can scale that up or down in any given market, two machines a month. When you look at statistically, it makes sense. If you pour in random data through the top of the funnel, you might end up with a 1% close rate. Um, when you pour in high quality data at the top end of the funnel, you will end up with a 6% or higher close rate. And when you have a tool that can monitor the number of opportunities passing through each stage of the funnel, from contact to opportunity to pre-quote to quote to negotiation to won or lost, and you're monitoring those metrics through each stage, you can make sure that your business is calibrated to achieve a defined outcome. Um the saying goes, you know, it's not magic, it's math, but it's quality of math that's being applied at each stage. You're starting with the top end of the funnel. Uh, the industry has relied on what we call status quo data, which is uh typically UCC data. Companies and banks or financial industries are under no obligation to file UCC filing. And that starts with the misconception. So people have regarded UCC as a proxy of the market. They might call it a proxy of market share, and it's actually not. Um, half of UCC filings on any given day are individuals, and three-quarters of the other half are companies with less than 10 employees. So it it by no means is it a proxy of the market. And if they're using that list as a prospect list, they'll have limited and inconsistent success. In other words, not predictable. So they may get lucky, like all of us get lucky when we go to Vegas. Uh, I don't gamble anymore because I was very unlucky. Um, but I don't play the lottery. If you're if you're turning to data and you you're not vetting that data properly, you will result in inferior outcomes. You may achieve partial success occasionally, but certainly not consistently. Um happy to dive into that more.

SPEAKER_01 6:08

Well, let's just start with the law of random numbers. You go out and you're gonna have about a 1% close ratio. You're gonna work your butt off, you're gonna be talking to all kinds of people, talking about football games, going to golf courses, having lunches, all that stuff. And the law of small numbers, you'll get two sales a month. Depending on the product, depending on the price range, that could be higher or lower. Congratulations. But to go from 1% to 6% by using quality data, that's that's huge. Absolutely amazingly huge. But what most people don't realize I took mathematics and physics at university in computer science and and statistics as minors. Now statistics are not arithmetic. Mathematical statistics are are dealing with probabilities. They're dealing uh looking at history to predict the future, and and looking at variables that will vary that prediction's success, standard deviation, all kinds of terminology that most people aren't into statistics wouldn't understand. But if I know the last two transaction dates, and if historically I know what that transaction distance is from one event to the next, parts, service, rentals, new equipment sales, used equipment, whatever it is, doesn't matter. If I know what the last two dates were on average, and I know what the size of the transaction is on average, I can predict the future with a very high degree of success. And that's your six percent. So if we look at this radical and and rapid transformation that we've gone through with technology over the last, I'm gonna say thirty years. It's been longer, but thirty years. Everybody's confused. It's happening, it's moving so fast we can't keep up. I had a podcast the other day with Matt Harris of Texata, sharp guy and MBA, but also has psychology in his educational background. And the business has changed. When I started 1970, you sold equipment, new and used, you sold parts, you sold repair and maintenance. But you didn't really do much of parts or labor. And Bill Blackie comes along, the chairman of Caterpillar and says, hey, wait a second, you make your money in parts and service, get over it. Well, it's one thing to say it, but to have people understand it, it's completely different online. And the people that were running the businesses then and continue today for the most part, are either sales or finance. And most of them don't they don't want to play in the service department because they don't understand it. So it's a

The Math Behind Predictable Selling

SPEAKER_01 9:10

similar circumstance, and what Matt and I were talking about, the dealers have to make a huge shift in their mind. Asset turnover is a critical element. In the rental business, the rent-to-rent business, you can have 50% return on net assets. In the heavy world, in you know, selling equipment, you're lucky if you have two to two and a half times turnover. Now the manufacturers are in a bit of a box because a lot of people are having trouble with selling new equipment or used equipment. And in fact, the rental industry and the equipment industry are almost in competition with each other. They both had their conventions at the same time, which is arcane because almost every equipment dealer is also a rental house, not vice versa, mind you. So getting to asset turnover, that's number one. Number two, going to six percent and what instead of one percent, that's that's huge, too. Now we're messing around with the leader's mind. And if the leader isn't the one that's driving the train, nothing's gonna happen. If the leader doesn't want this to happen, nobody's gonna do it. If the leader wants it to happen, there's no real probability of high degree of success because a lot of people, ah, there he goes again. All kinds of nonsense. So you're running up against status quo or paradigms or whatever terminology we want that you're challenging and saying, wait a second, what you've been doing the last 500 years doesn't work. So I'll I'll shut my mouth in one minute. Let me make one other comment. 1878, which to me is the metaphor for change in anything that I've ever looked at. It was the arrival of the electric engine replacing the steam engine. There was a financial benefit, it was cheaper than a steam engine. So people bought the new engine, but they didn't change the process or the methods and how they used the damn tool for 20 years, a generation. And we're going through the same thing. Henry Ford, when he put the production line out, he had to raise the salary of his employees so people could buy the car. There was 44 miles of road in the United States at the time that Model T came out. What in the hell is he doing building a car? Elon Musk, three explosions with SpaceX before he hit the right ball. So, how do you overcome that much embedded tradition, status quo, and get people to say, damn, that's a great idea. Let's start it. How do you do that?

SPEAKER_00 12:01

Well, uh, like everything in life, you know, it's a small habit that consistently applied. It's hard to see the outcome, but if a I think deep in my heart, I do love this industry and I love the local ownership. And I love uh I look at the margins, broadly speaking, in the construction industry as a whole. And if then if you back into capital goods, the industry is best served, uh, in my opinion, through entrepreneurs. And we can look at sort of the backdrop before answering your question. The backdrop is uh high cyclicality, and people can say that's a cycle. Uh, it's a it's kind of a in many respects an avoidable cycle, right? I'm excluding booms and busts like the financial crisis. Um but the cyclicality is largely avoidable, certainly the extremes. The second thing is um the industry has been consolidating substantially. So you see OEMs and dealers either buying their distribution or buying adjacencies, and they're doing that to increase their gross margin dollars, but not their gross margin percent. And so they're they're kind of kicking the can down the road, and they've amassed a larger amount of customers, a bigger geography, and they have more things to count, but they're not let necessarily looking at what costs no longer serve them. And with it the small changes that can very easily occur is start with, and you inspired me, which start with a small number and it's a closed loop. So if you can start um it wholesale change takes certainly a lot of confidence, right? So short of having confidence, companies can certainly engage in an experiment. And that experiment would be the owner of the company or the leader of the company supplying their Salesforce with high quality buyers in a market, buyers being somebody who both owns rents and consumes parts and service. They build things, right? So they need machinery for their efficiency. Start by feeding them 10 process, 10 prospects that are highly vetted, where mathematically you can compute the outcome to end up at 6% close rate. Put it in a closed loop system where you, as the owner of the company, can see mathematically these tens go through each stage to see if you achieve your goal. Um, and you can intervene in the process. So I would argue start incrementally if somebody doesn't have the courage to do wholesale change. If they don't do this, the implications are quite severe. Um, you'll have continued turnover. You'll have uh turnover is very expensive because you have institutional knowledge acquired by even a new employee, leave, replace them, train them, put them back in the field. You'll have high turnover. Uh, you have very, very high selling expenses. And your net margins for most dealers is um your EBIT margins are less than 10%, and your net income margins are what, two, three percent. In the case of many OEMs, they're similar. So you have to start the change and look at um tasking your team with very, very directed outcomes. So then you can gain the courage to say, I'm gonna make a wholesale change and redo the capital structure of the business to focus on actually what's realistically achievable, as opposed to this constant cycle of hope and disappointment. And I I can break it down further.

SPEAKER_01 15:57

So let's let's still stay with that because in embedded in that discussion or dialogue was a brilliant point. We've had consolidations, either through failure of a company and they go bankrupt or because of negotiation with a neighbor and merging and all the rest. And what they got was more gross profit dollars. So they looked at the gross profit dollar value as their salvation. I get more income, I can look after more things. What they didn't realize is they brought across the same amount of debt.

The UCC Data Trap

SPEAKER_01 16:42

So coincident with that, here come the manufacturers and they're saying, Well, the market's getting a little softer, so I'm gonna put something out there to induce my dealers to buy now, so I protect protect my production line. And almost everybody has put out six-month, nine-month, twelve-month flooring. Well, that's cool, it saves the manufacturer, but what does it do? It pushes the cash problem into the dealer's pocket six months down the road. So here you are in in June 2026, and all of the things that the manufacturer gave me last year and credit to that I had to pay, that that payment comes due this month. I I the last car I purchased in California was a Genesis. And I go to the guy, and and they're a great car. And I I if if I wasn't on the island, I had a 500 horsepower Genesis here that I couldn't even get it up to speed before I ran into the water. So, you know, it was it was the wrong vehicle, but boy, it was it was silent inside. So I'm talking to the owner of the dealership, and I say, Well, you got a couple of nice cars out there, they're pretty expensive. They all pay for it. He says, No. I said, Well, okay, what's what's due next month? He said, Well, this and this and this. He says, Well, I'll buy one of them. Which one are you gonna have the hardest time getting rid of? He said, Well, that one. I said, Okay, I'll buy that one. Well, that's great, terrific, but I'm only gonna pay you what you would have had to pay. In other words, you're not gonna make any money on that sucker, I'm saving you. And he agreed. So I bought a card that was was worth 80 grand for 40. He said, That's terrific. We'll write it up. He said, No, no, no, I'm gonna ship it to Hawaii because I don't want to pay the sales tax in California. So I spent a thousand dollars shipping the thing from California to Hawaii to save six percent on sales tax. And I had the car. It was wonderful, absolutely fantastic. About 12 months later, I said, This is no good. I can't even I mean, it's nuts. So I shipped it back and sold it there. How much do you think I sold it for? Sixty grand. So that one year I made twenty grand on nothing. Right. Which is kind of what we need to do now. So here comes a rental company. The motivation that the customer has is he's got a machine that he needs on the short term to do a job. Needs to dig a hole, needs to make a mile, whatever the hell it is. The machine goes down. Oh my versus an equipment dealer who sells a machine. The customer bought the machine, he uses the machine as operation, it goes down. What does he do? He sends it to the dealer if he does. But let's say he sends it to the dealer, and the dealer, in order to be efficient, he's got two labor tracks. One is maintenance, one is repairs, one is repairs that can be scheduled, one is repairs that are in the field. So I've got shop mechanics and I got field mechanics, and I got different backlogs that give me different efficiencies. So now the customer is rental company, now the customer is a he bought a machine. If the machine's down and he bought it, he asks for a field service guy. The backlog field service, maybe it's today, probably tomorrow. The rental guy goes down, he doesn't ask for a mechanic. He says, Give me another machine. It's a different world. Different priorities, different asset utilization, different customer satisfaction, different urgencies. I mean, it's it's has anybody changed? No. You worked with Volvo Rents, you look at a Volvo dealer, has a rental fleet or a rental company, they operate those businesses in a completely different manner. Shouldn't, but they do. And you're right. Get a small test case, prove the point. Replace the steam engine with the electric engine. That's only a start of the deal. We've got to have people that are prepared to fail. But they're not.

SPEAKER_00 21:07

Yeah, you know, it's funny. I was reading something last night, and I I'm just gonna quote it off the top of my head. It may not be entirely accurate. Please know that uh it's a function of working too late. But I believe uh Volvo's uh results and North America Volvo construction equipment were down 14% year over year when the industry is unclear, call it flat. And the question is why, right? The dealer network, I'm not that close to it, please know that. Um, appears to have gone through some consolidation. Um they made some various bets that uh didn't work out, meaning entered certain segments like compact and then paving and then withdrew uh to some extent. And um you you're you're caught you're seeing some massive sort of whipsaws in distribution uh in that rip you know, ripples all the way through. So what do you do, right? How do you get out of it? And what I would say, you know, the OEMs, broadly speaking, need to, of course, grow closer to the distribution and to align the incentives, right? So if you think about the power of 10 names on a salesperson, and to the extent that the OEM and the dealer partner on the outcome to achieve and land those counts, they'll vastly increase their capital efficiency that you talk about because you deploy less capital and you're very, very focused on achieving certain outcomes. Or keep doing things the same way and you'll have very high cyclicality, you'll have losses, you'll you won't quite have booms, but you will have some negative quarters.

Technology Change And Asset Turnover

SPEAKER_00 22:52

If you also look at the industry, the industry is going through some major changes. And those are in itself are cyclical, kind of enduring cyclicality. If you look at the rental industry being north of 50% of all construction equipment demand, 30% of that is controlled by three companies. Another companion to that is they're normalizing 15% of the used equipment market when they dispose of those assets. Massive force, right? Compound that force with what sectors are growing today. You can call it label it data centers, but it's data centers and energy and sort of the electrical grid. You have the top 400 contractors in the United States controlling 30 percent of all construction spending. And so you have increasing concentrations both in the rental industry and in the construction. And so what does that leave? Um that leaves uh in in the in the math in my mind is about 23 percent of all construction companies will uh account for 77 percent of all outcomes. So when you've just shaved off the sort of the right side, the ER, top 400 controlling 30%, and you you shave off the bottom piece of the market, you're left with um uh a relatively small amount of companies. It's enough, by the way, that are likely to need uh uptime in TCO, right? You can leave the bottom end of the market to the bottom fishers who don't have the capital or the insight or the foresight or the wealth, frankly, to buy machines that are reliable. Um, so they'll buy uh call it less resource machines, and small companies wind up in this constant state of turmoil. So you must focus on the stable, growing, secure side of the market and move towards the hot spots or uh sign up for extreme cyclicality, you know, an extreme amount of pain and turnover.

SPEAKER_01 25:10

And cyclicality, cyclicality is is no no favorites. You you can be brilliant or you can be terrible, you're both going to suffer the same fate. You know, it's yeah, it's it's interesting. You and I have talked about this that I believe every 20 years the number of people competing in a supply chain has reduced by 50 percent. So when I started in Canada in 1969, call it 1970, to today that's 55 years. In 1970, there were 10 caterpillar dealers. Today there's two. So if we look at 10 and we go out 20 years, from 70 to 90, we're down to five. From 90 to 10, uh 2010, we're down to two and a half. Well, we're at 2025, so I'm not really there, but I'm there. And I do the same thing with every 1985, there's a hundred dealers out there in mining. Let me tick one that's nasty. Today there's three Caterpillar, Kamatsu, and Hitachi. That's it. Nobody else in the big stuff, and then you come down on the size of the equipment. So we've got mining that that could be 30 million, 100 million for a tool. Now you come back to the large crowd, the the tractors run from say t D10 down to D6, and and that's Caterpillar, Kamatsu, Deer, Case, Volvo, a bunch of people. And then you go down again to the smaller, the compact, small underlying, whatever you want to call it. That's the bobcats and the gales and the kybodas and the mahendras and all the rest. And now we look at economics. So I got three in the major, I got maybe a hundred in the large, I might have five hundred in the mid-size, and the magic with five hundred is there's enough net income made by the five hundred as a group, but there's not enough net income made by any of them to sustain themselves. So people have not people have not brought business thinking to the same place that the market requires today. Business schools, Harvard, Yale, etc., they're still teaching the old stuff. Most of the financial VPs and and whatever we want, they're dealing with history. Looking at the report, one of your blogs, you say, how do we do? Do we get more or less? If we had more, everything's cool. If we had less, we had a discussion. We didn't realize what happened. It's too late. We can't change it. It's done. What are we doing proactively? What are we doing tomorrow to make a difference? And therein lies the rub. People don't know what to do. Google's now training everybody on AI. Google. What in the hell is that all about? Well, because they think. Google looks at their investments, 7% on the current business, 2% on improving things, 1% on a wild, whatever. We should all do that. Throw some money against something you have no idea about. Who's so I have a little project in consulting that I've done for years called Five Things. And I might have mentioned this to you. We get a department together, all the employees, one of our monthly meetings that are an hour and a half, and I have three questions. Everybody get your pad and your pencil. The first question is, What would you like to change about what you do that would make your job easier? Just write down as many as you can, but I want five things. Finished with that, terrific. Next question is What are five things you do that are a real pain in the ass? Just write it down. The next one is, what are five things that you'd like to do that would make the company a lot more money? Five things. And then we don't editorialize, we just take a list, put it up on a flip chart, or put it on a computer, and we got them all up there. Then we start grouping them. These are similar, blah, blah, blah. And we end up with the top five. Things that we would change to make your job easier, things that are a pain in the ass, things that would make more money. And guess what? Two or three of those are on all three less. And then I start, well, if it's a pain in the ass and it makes more money,

Start Small With Closed Loop Tests

SPEAKER_01 29:40

it makes it easier. Why aren't you doing something about it? But then next month, I bring in five or six customers. Have the same people sitting in the audience, and I ask the five or six customers, what do you guys need or want from us? What do you need? And they make me lists. And then we compare that they go away, thank you very much. And we have questions and answers and all the rest. The following month, now it's been 60 days. I got, here's what the customer said, here's what we said, where's there a match? What are the things the customer wants that we don't even do? It's really simple if people stick their head up over the wall and ask the question. You don't think, how can I help you? Somebody walks in the door. Good to see you. Thanks for coming by. Anything in particular you're looking for? People have lost that ability. How do we get it back?

SPEAKER_00 30:44

Well, what's kind of cool is um I think people are opening up. I mean, through the power of AI, um, it is an industrial shift, as you say, you know, an industrial revolution. It's a great opportunity to radically uh reassess your cost structure and how you do things in the sense that I know even in our company, uh, even though we're fairly nimble, um, once you've made a decision and it's a year later and you have to memorialize it, it's it's a little bit of baggage. And so if a company has been around, we've been around a little bit north of two years now. Um if you have 30 years of those costs that are accrued, now is a perfect opportunity to reassess your cost structure. You if if the owner of the company can sit down with you, by example, and do simple math, right? If you can't write it down by hand, the simple math is how to turn your business into a sort of a predictive uh engine. And you just predict what you can predict, right? Control what you can control, and come up with your uh pro forma about how you right size your profitability. Fundamentally, what this is going to break down to is about 15 customers per market in a geography for a rental store, by example, a little larger for a dealer, let's say it's 45 per geography per store, since it serves a wider geography, would do about 62% of their business. If you can't name those accounts, um, but you can, so let's go with that. You must name those accounts and you must radically go after them as Conquest. And I would, you've and I have talked about this before. I would absolutely starve the machine. Anything else that is not directed at either those 15 accounts in the rental business or 60, approximately 60 accounts for a dealer's operation. Starve that machine and then put all of your incentives directed at converting those named accounts. Um, you must do that. You must do it now. If not, um the big rental company has ridiculous advantages, meaning they control the capex of the industry. They have market power, they also control the used equipment market through their disposals, meaning control, meaning they make the market. Um, so they have fundamentally shaped the outcome of the market. Then if you look at the ENR top 400 and data centers, electrification and energy, that's another 30%. If you don't move in that direction, you're essentially a turnaround. And as Charlie Munger says um or said, he doesn't do turnarounds. Turnarounds are tough. And in many instances, this industry classically has comorbidities. Comorbidities are really hard to treat because you have to triage each morbidity. It's hard, very hard. So, how do you get out of it? Stop the bad habit one at a time, right? Um I I wish I could be more elegant in my speech. Um, you call it a closed loop, close the loop, see what happens. If you can't write it down, if you can't name the 15 or the 60, don't do it. Um, don't open the doors. If your CRM is not serving you, get rid of it. Um if you're stuck with your dealer management system and despair of data, if you can't see the 60 that you're targeting per market, then build something on top of it until you can replace your DMS with something relevant. Uh look for industry solutions. Don't necessarily buy into the notion of uh slick sales propositions from an ERP or a DMS. Um that essentially is kind of a tax on your business. Now's the time more than ever to be more nimble.

SPEAKER_01 34:51

So it's it's um what I took computer science as a minor and learned how to wire unit wrecking equipment in the 60s. I was the computer in the day. I'm a dinosaur. You can't, I'm uh maybe they're in museums somewhere, but I don't know where those machines are. The other day talking with Matt Harris, and and what I heard at the time was the coders of today, this is the 60s, are the clerks of tomorrow. And Mack made the comment, he said, we don't need coders anymore. The computer can do its own coding with artificial intelligence. So we can spit out code like you wouldn't believe. And and so as we follow that, Lewis Kirstner, when he took over IBM, guy comes from the largest consulting company in the country, has his first meeting of with his executive team, there's 20 in the room. And he goes around one by one by one. He says, Who are your top three customers? To your point. They didn't know. He goes, two or three guys, meeting's over. He says, We're gonna meet next Friday, and I want to know who your top three customers are. They didn't know. So the meeting comes back, he gets the top three, has a brief discussion with each guy, meeting's over. What do you think he did next? Took the list of 60 customers and went and visited every one. Sat down and talked to them. What do you want from us? What do you need from us? Went back after 90 days. He'd done some planning, gets his group together. This is what we're doing for the we're this is what we, IBM, it's better manual, international business machines, are gonna do. Save the company. Amazing. And that's amazing. And that's at the time that many computers were starting. Tablets were

Consolidation Cash Pressure And Rentals

SPEAKER_01 36:50

starting. Well, tablets not yet, but you think about the large mainframes. We start from unit record to large mainframes that take up a whole room. They gotta have you read on gas and things to protect any event there's a a disaster. And now you got it. My laptops got more, my cell phones got more power than the computers I started with 50 years ago. It's amazing. And how many people know what the heller system does? That's the other side of the world. And I think you've heard me say this. I I wanna I I asked somebody, you know, what do you what do you do? Who dude who told you to do what you're doing? He says, Well, I I did. I figured out what's the best way to do this job. I said, What do you mean the best way? And when you get down to it, it's the way that it's easiest for them to do. It has no bearing whatsoever on what that job should be. Somebody calls up today and they want a price and availability, and they're just checking. They hang up the phone and go away. Tomorrow I want somebody to call them. Do you think they do that today? Hell no. There's so many fundamental things, basic blocking and tackling, not difficult that we gotta do, but we gotta get people to want to do it.

SPEAKER_00 38:14

Well, you can start, you know. I I mean, I I've always learned I always learn from you in each and every conversation, either actively or passively. Sometimes it takes me a little while to catch up to you.

SPEAKER_01 38:25

Don't don't don't don't do that. Save your lift your left arm, save your watch. It's getting pretty deep in here.

SPEAKER_00 38:32

Well, actually it's true, but uh Yeah, okay. I appreciate it. You know, it doesn't sound true, right? Is it there's a core notion there, Ron. I mean that from the bottom of my heart. And when you recognize excellence, sure, put your earmuffs on. And I see it in everything you do and how you live and how you interact with me and countless other lives that you've touched. If you take that same discipline and you apply that to your enterprise, how can you change? Right. Find the good people, right? It's it's you. It's in Bill Gurley's book, you know, running down a dream. Make a defined list of outcomes of what you're trying to achieve and learn from them. Um, if it's your customer, learn from them, right? Distill your business down to the essence. And you're gonna, if you don't do that, you're gonna end up being a turnaround. And turnarounds end up being uh pain, right? Somebody's just gonna take a loss. There's no question, right? It doesn't just turn around, right? It becomes truly lost money, lost jobs, lost whatever. How does an OEM change? Start by redoing your co-op program. Start today. Don't make it sort of you want your dealers to use your co-op program, but re-engineer it. It's built on an anachronism that said, if you spend 50 cents on this, we'll we'll match you 50 cents on the dollar, right? Redo that, turn that into your little mini venture capital fund and make it a customer bogey on named accounts. So if you market to these customers, there's a bogey. If you sell to these customers, there's a bogey. When you complete a successful sale, there's a bogey. I would cancel the co-op program and reorient it 100% times the um 10, 11% of customers that would do 60% or 3% of the customers that will do 62% of the business. Start there, right? Don't spray and prey. Conserve your capital, wipe out your co-op program. You can still keep your uh large brand fund to go, you know, advertise in the market and sustain your brand. Start there, small change. If you're uh a dealer principal and you you sell and you rent, you do product support, do the same thing. Conserve your capital because your cost of sales is actually quite high. You may be paying somebody a pittance, but when you factor in uh a truck, a computer, the systems that support them, the subscriptions to UCC data and other data, you're looking at a quarter million dollars fully loaded. That's 125 bucks an hour. Every sales call costs 125 bucks. Narrow that down and establish incentives for targeting those 10. Um when you contact it, there's an incentive. When you close them, there's a double incentive. Starve the rest of the machine. Um, must start with small actions that will have a disproportionate impact. And that's how you can begin to correct the comorbidities. Um I wish I had more insight.

SPEAKER_01 41:46

No, no, it's it's it's it's perfect. The again, the numbers. Give give a a store 125 bucks a call. How many calls can I make in a day? Well, sales management about 10-15 years ago decided that CRM was the answer to their maiden dreams. So I'm gonna know exactly how many calls my salesman makes. And then I can get on their case because George does 10 calls on average a week, a month, a day, whatever the number is, and he gets two closes. Henry does five and he gets one. Now, which one of those two is better? Now we can start having those discussions about who's the better salesman, has no bearing on who's the better salesman, it's just who's got the numbers. Jim Surbrodby, who does the automotive side for us in a in a blog, just we're publishing a blog in the next week or so from him that says it's the numbers. And we've all been focused on numbers. What'd you make last week? How much was that work order? And then he starts so he he takes over a company and he he's interviewing all the people. And and you're right, turnarounds are a really difficult thing if they're possible, and you know why? It's the fundamental change. If you don't turn it around, it's going to fail again. The reason it failed is because how they did things was wrong. So it creates an opportunity for me, the buyer, to make it right. What's the right thing to do? Drop a bomb, blow it up, and start over. It's easier. Pretty much, yeah. And it's no question. I had a guy go off on vacation and tell me, Ron, I want you to come in run this place for the next six months. And he said, You can do whatever you think is necessary. So he goes away, I do that, he comes back, everything's good, company's on its feet, I leave. He calls me after every day for the first week, he says, They can't. I can't believe what you did. What did he do? What did he do that? Really? Did you know he was going to do that? No, I didn't know that. How'd it work? Oh, Jesus, it was real pain. Every single day they said he called me, said, you know, I could never have done that. It had to be you. It had to be an outsider. Because they would have made me feel bad. Or they would have argued effectively. They would have talked me out of it. Think about Charlie Munger and his lattice work. You know, it's it's very simple things normally.

SPEAKER_00 44:36

Well, if you cut cut it through on the call it the monger, it you know, it as you espouse, the power of incentives is vast. And it's vast in a number of ways. It cuts through a lot

Name Key Accounts And Starve Noise

SPEAKER_00 44:50

of opinion, right? And you can say, well, data cuts through opinion. And you know, it's is it my data, is it UCC data, is it built data's data, right? Whose data set is smarter? We're not necessarily seeking to be smarter, but one thing that can cause organizations to work together is the power of incentives. And if you can reallocate, form your own venture capital unit inside your company, inside your manufacturing organization, create uh a pool of money by wiping out some programs like co-op, right? Get rid of it. It's not serving you. Um, think it with put some money off to the side and try and co-investing through the power of incentive. So, you know, if you look at Buffett pre-munger, as the folklore goes, Buffett would look to buy the cigar butts, right? He looked to buy a, you know, an okay company at a great price, right? A deep, deep value discount. He'd like to buy a deal, right? And Munger changed his philosophy to buy a great company at a fair price, right? And very, very different. What the distinguishing factor is one was kind of financial engineering, which was the old buffet. The new buffet with Munger was more about uh sustain sustainable, predictable profitability, right? That's continually going to grow. One thing you know for sure, the same 15 or 60 customers per market will sustain and grow. It's a fact. So why not align your incentives to focus and you've secured 60% or more of your company's profitability, and you can begin to work yourself up the chain from there. Um you have to do it. And it you should, somebody should take great solace in that because you can actually see it, right? It's not couched in opinion. It's not counting somebody going and doing uh extensive financial analysis or data analysis. You actually don't need business intelligence to do it. You just need the discipline. And uh we just recently launched a client and we put in a limited amount of data. One of the remarks that came across is, well, I was a little disappointed by the volume of data in the system, right? Because they were used to a bunch of, in my opinion, to and say that to the client, a bunch of fucking nonsense, right? Um, that makes it look like it's plunk, right? That it's not, right? You you have to distill it down to the highest quality inputs and make it work. Um, you have no choice today.

SPEAKER_01 47:32

The beautiful thing about what you're saying there is I can identify in every one of the operating departments, parts, labor, rental, machines, new and new. So I got six different categories. I can identify the top 10 or the top 20 names, accounts, and what percentage they represent of the total in cash. So I know what the contribution of cash is to my ult overall enterprise. And frankly, I'll go down as deep in the number of customers as is required to come up with the amount of cash that they spend that's equal to or greater than the total expense that I operate in that company. Anything other than that, I I'm I'm gonna leave to chapter two. Chapter one with them is I want to make sure I get all of their business all of the time forever, and I never lose one of them. Ever. Then chapter two, who are the guys that underperform? Now, if you think about it, I know based on the rental fleet, what the consumption of parts and labor is per operating hour of a machine. So then I want to take that statistic and I want to look at the guys that buy machines and I want to look at what their consumption is for operating hour. If it's close to what the rental company is, same thing. I want to go make love to those guys and never want to lose them. If it isn't, who's the underperformers? Now I can identify who my prospects need to be, which is what you're talking about. I know who's going to buy next month, period. Based on what the operating cost is on that machine from birth to death. I've got life cycle analysis, I've got GPS, I know many hours, I know what they bought, I've got all that data. Use it. But chief information officers, etc., incentives. I don't know if maybe it's not the right approach, but landman, a a TV series. The very last episode, they own uh an oil company first time. And one of the first things the guy says, who's Billy Bob Thornton's the main guy, and he says, Okay, we're gonna take the company, the first 25% of the revenue, we're gonna put it in a pool, we're gonna share it with every employee. There's the incentive. Yeah. So there's a guy by the name of Jim Patterson at the largest car dealership in Canada. I mentioned them to you. Whoever was the least successful salesman every month lost their job. That's a different form of incentive, you know. Make a sale, or and and now what that did, that that did not create teamwork. That created a bunch of guys that killed each other. So you gotta be smart in how you do it. So we've got the data. You've got the tools. We gotta get you selling more to more people so that you can influence more. We gotta make it easier for people to understand what you do. How do you calculate market share?

SPEAKER_00 50:50

Well, you inspired us. I I know you don't like hearing that, so you probably uh just I'm gonna put your earmuffs on. You inspired us to um to map market share for the entire country. And I call it layers of common sense. And I I'll tell you a funny story. I was in uh San Jose this past weekend with uh one of our couple of our advisory board members, and Venke's wife works for the uh the company that produces the maps for companies like uh Apple and Google. And I don't know about you, I have not thought of the map before when I look at it in my car. It just works, right? It's awesome, right? I it's so awesome, I don't even think about it until I'm sitting there over dinner at this wonderful home cooked Indian meal. And um his wife, uh Artie, was explaining to me about all of the nuances of a map and all of the layers of the map. And it's so specialized in all the things that I take for granted when Waze works or the map works in my car or whatever. There's many good mapping programs, the amount of expense. I'm like, why would they outsource it? She's like, it's it's a freaking business in itself to keep those maps up to date. One is you have to map everything. Now you got to keep it up to date. So, with thanks to you, you inspired uh our data team, uh, as you say, data scientists, to build the layers of the map. So we understand the economic output across the country. We understand uh where those machines are consumed. We understand um, in some cases, specifically, in some cases, we have to impute it, is the market share by brand. Um ultimately, what we're trying to do is direct a few amounts of clients to take advantage of market hotspots and take advantage of companies and competitors that are confused by this whole subject that you and I have been talking about. Um where somebody is confused and misapplying capital, our clients can direct bigger guns, bigger incentives to accomplish their goals. And what that's gonna do over time is um little micro disruptions, right? Hate to put it in those terms, but it's fix your business one customer at a time, secure the 15 if you're a rental store, secure the 60 if you're a dealer per store, and you've turned your business around before you know it. It's not a three-year initiative, it can be done in months.

SPEAKER_01 53:26

So it's it's really intriguing because you know, the same kind of thing. The distribution model mapping is a good illustration. The dealer I started with in Quebec was created in 1952. Three brothers bought it. And the guy that came down to run it, Bob Hewitt, used to be the vice president of sales and marketing for the Caterpillar dealer in Ontario. And we had a facility in Quebec City that we inherited. And then I'm there and I redid all of their distribution centers. So we we we put designed the thing in the right location for transportation for customers and all the rest of the stuff, but we moved out of the old location. We found a basement that had parts that were rusted to the concrete floor. Nobody knew it was down there. And that's the trouble with data.

Market Share Mapping And Final Takeaways

SPEAKER_01 54:30

You you've got wonderful situations. So what's the most important thing about market share? And what's going to be really interesting is, and this is survey data going back for 50 years, there's an interesting statement. IBM, excuse me, Caterpillar, used to interview face-to-face every single customer every five years up until 1965. They had a caterpillar employee talk with face to face in person, everybody who owned a caterpillar machine everywhere in the world. He said, What are you talking about? I said, Well, you get up close and personal, you can make very definitive decisions if you do it every five years, 100%. Are you telling me you're going to have the same quality of decisions if you do 20% every year? He said, Yes. I said, Okay. He then went over and ran Europe, which is all of Europe and the Middle East and Africa. EMEA today. It's called Europe, Middle East, and Africa. And he called me, I thought this is a long time ago. He called me, he says, you know, that 20% stuff doesn't work over here. I said, Oh, really? Why is that true? He said, bigger orders, bigger dealers. There's a thousand machines in Saudi Arabia. This is 1970. That's a lot of machines for one country. Find any dealer who's got a thousand machines today, you got a really big dealer. I said, Well, why is that a problem? He said, Well, we didn't have enough technicians to look after them. I said, Oh, how's that show itself? Well, you see a lot of tractors on the side of the road dead. Because there isn't enough technicians to come out and make the repair. So you buy a new machine, they had so much money, it didn't matter. Every market is different. Every county is different. So the major differentiator in market share from my perspective is how far the customer location is from the supply point. The further, the lower, the closer, the higher. Market share. Life is pretty simple in many respects. So take a brand, what's your market share? Take a salesman, what's your market share? Take a store, what's your market share? Take a department, what's your market share? In parts and service, we haven't had a good tool to measure market share. We do now.

SPEAKER_00 57:14

Yeah. It's interesting because, you know, in life, specificity builds trust. And correct. And if you uh I've learned some of the worst decisions I've made in my life is when I've sort of allowed myself to be confused, whether personally or professionally. And they were very, very expensive, whether it was personal or professional. And usually couched in somebody's lack of specificity was a lie. Okay. And that lie can be some people can play around with the definition of is it a white lie, right, or a black lie, right? Or but it's still a lie, it's deception. And the the owners of these companies and the and the families who are share, in essence, shareholders of their businesses. And if they have investors, then of course it's more traditional. Specificity will build trust, it will build happier lives. We're not here for long. Um focus in on a small, distill this data down and align the incentives. Um talk to you, right? Um for clarity in the process. If you're a OEM or a dealer and you're buying back your distribution, so you don't end up recapitalizing those operations, realign those incentives today. If you have to do that by cutting things like co-op programs or ripping out CRM systems or systems and processes that no longer serve you, you must do it to form this little venture capital firm to align the incentives to focus in on the 3% of customers that would do 62% of your business, or the 11% that will do 83%. And look for new technology that can allow you to jump the curve. If it feels too heavy to move, uh, usually it's designed that way. You know.

SPEAKER_01 59:10

So that's a perfect way to wrap this discussion. You gave people things to do, pretty simple, but it's all about reinventing everything we're doing. And it's all based on data, and that's still my concern because I don't like the quality of our data yet. It's still noisy. And and I'll I'll take the error. And I I'm, you know, what you're talking about is the Poisson distribution curve. If you can give me six percent of the companies, it'll give me 80% of the business. I'm I'm all in, man. If it's 80-20, I'll I'll still do that. But that tail takes too much time from too many people, and it doesn't give you any results. And and that's that's the message I want to give to people. Reinvent your business, have a look at it critically. Look for your biggest customers and pay attention, never lose them. So, on that, Nick, I want to thank you for the time. It was wonderful. I think I hope that you got a whole bunch of people thinking. And those of you out there that have been listening to us this whole time, thank you very much.