Stop High-Fiving Revenue And Start Banking Cash

Busy doesn’t mean profitable, and “we sold a ton” doesn’t pay the bills. We’re joined by John Dowling, author of Service by the Boxes, to unpack why so many equipment dealerships grind through full shop schedules, nonstop parts traffic, and big whole-goods numbers, then look up at year-end and wonder where the money went. John’s blunt diagnosis is an “invisible threat” problem: leaders often believe they’re in the equipment business, when the real mission is profit and cash flow. 

We dig into the economics that get ignored, including parts and service profitability, labor gross margins, parts margin floors, and how absorption is really about controlling expenses across the dealership. From there, we shift into leadership and operations: firefighting executives, teams trained to ask permission instead of solve problems, and why basic management systems like performance reviews and clear roles matter. John makes the case for SOPs that explain the why and the how, remove friction points, and create the kind of consistency customers and employees can trust. 

Customer retention is the multiplier that ties it all together. We talk about customer churn, lifetime value, key account habits, and the open-ended questions that uncover what customers actually need. We also get real about data analytics and AI: the tools are here, the data is already in your systems, but the advantage only shows up when you use it to lead proactively. John is giving away his new ebook, “What’s Really Holding Your Dealership Back,” at servicebytheboxes.com before it goes to print. Subscribe, share this with a dealer leader who needs it, and leave a review if these conversations help you run a stronger business.

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.

Transcript

Welcome And Free Book Offer

SPEAKER_01 0:21

Aha. Welcome to another candid conversation. Today we're joined by John Doling, and he's got some pretty exciting news. He's got a new book out there. So, John, good to see you. What in the hell have you been doing? How come you had time to write another book?

SPEAKER_00 0:36

Well, I um, you know, I'm I'm a glutton for for for punishment, I think. So I I get these harebrain ideas, and I'll I'll be honest with you. So I my first book, you know, that I that I that's all has already been published service by the boxes. I started writing a bigger volume, and I realized, you know, nobody's gonna read this, it's too big. And and so let's just make it simple, let's make it where where people can read it. And and so, man, I've so sold service by the boxes, like literally all over the world. And everybody says, I love it because I can read it, I can understand it. It's not theory, like you can apply it. And so I started writing the original book. I was like, I know nobody they may or may not read it, but it's really um, it'd be a really good book, you know, a little bit deeper. So I started writing it, and then I then I just go down this rabbit trail. And so I just uh I guess about six months ago, um, finished uh my second book. It's called Um What's Really Hold Holding Your Dealership Back um before it goes to print. I'm giving I'm giving it away for free as an ebook. So if they go to my website, Service by the Boxes, they can scroll down to the bottom, you type in your email, and it'll send you a PDF a PDF copy of the book before it goes to print. So it'll cost you $20, $30 once it goes to print, but you can get it for free now. Um, and so really it's called what slow slow down a second.

SPEAKER_01 2:11

Your website is servicebytheboxes.com. Yes, sir.

SPEAKER_00 2:15

Service by the boxes.com. And it is there a a place that it highlights that you could they can order um an advanced copy? Yeah, if you just go down, scroll down to the bottom. Um you can just it just say I forget what it says, something about you know, uh down download John John's new new new book for free. And you you type in your email address, and then it will like almost instantly email you the book.

SPEAKER_01 2:41

Okay, so service by the boxes.com, go down. John will send you the book. Okay, and I just want to make sure everybody knew how to get it.

SPEAKER_00 2:50

Yeah, and if you want to, I I can send you a link that will take take you to a page, and then you can send that out to people if you want. Do that, and we'll add that to this podcast. Okay, perfect, perfect. So uh yeah, so it'll go to print. Um, I don't know, part probably before years in. So I started writing another book, so then it's like I need to get this one through print, but then you know, you're creative once it's like this thought happens, like you just got to get it out. You know, I I don't do good keep keep keeping it all uh uh inside, so I got to get it out. And so uh writing another book, really developing the the framework of of managing and really leading a dealership. So um trying to do I'm I'm I'm so impressed that you do that.

SPEAKER_01 3:38

I've got 24 book subjects that I'm supposed to write, and it's in a thing I call a series of things I learned in the dirt. Oh, nice, and they're about 120 pages each, subject specific, and I try to do exactly what you're doing, but somehow time gets in the way, yeah. So I'm congratulations. I mean, yeah, and I agree with everybody that Service by the books is wonderful. Anybody out there that hasn't bought it, buy it. Because it's it's a how-to book, it's a follow the bouncing ball. This is how you're supposed to do anything. Good work, yeah, and good luck on the next one.

SPEAKER_00 4:18

Yeah, so the the book that I had recently finished, some given raise e books called uh what's really hold holding your your dealership back. And just like you and I, we've talked for years, and what I've realized is a lot of the owners, GMs, they um man, they're they're great

When Hard Work Still Pays Nothing

SPEAKER_00 4:39

people and they've got good people, but they just can't make money. And and if they knew what was wrong with their dealership, they they they would probably adjust, they would probably fix it. And so I realized that like there's this in invisible threat of they don't see it, they don't know it. And a lot of dealerships, like they're really busy, you know, equipment is coming and going, the service department seems to be full, there seems to be a lot of customers at the parts counter. But I this is a almost a verbatim quote from from one dealer that I worked with a couple years ago. And he was John, he goes, at the end of the year, I looked down and I realized how little money I made. And I was like, I did all of that to make this. He's like, I might as well just get a job at McDonald's or something, like distress. And he he made this point that was an eye and I an eye-opening uh uh scenario for me. He's like, I was almost wishing that the bank would not renew my loan so I could just sell everything and get out of this business because I'm working my butt off and I'm stressed out and my blood pressure is high and I'm not making any money.

SPEAKER_01 5:54

What's really remarkable, John? A lot of the guys that are running dealerships well, first of all, they're either coming from the sales line or the finance line. Yeah. Financial people today the report comes out, and if they're in line, everything's fine. If they're above, everything's fine. Yeah, if they're not, then somebody gets called in the carpet of what the hell's going on, blah blah blah. The trouble with all of that stuff from the financial guys is that's yesterday. That's not even today. Yeah. So what the hell are you doing for tomorrow? Nobody's thinking about that anymore. If they're coming from the sales side, and you and I both are operational kind of people, I don't care where you make money, I'm gonna help you make more. Yeah. But we're product support people. I want to, you know, I I grew up in the caterpillar world and we looked at the machine, it was baked. You can give the damn thing away because I'll make all the money on parts of service. Just let me have it. Your your service by the box is does the same thing. What's holding your dealership back is going to be doing the same thing again, isn't it?

SPEAKER_00 7:04

Yeah, so in in chapter two, I talk about the the invisible threat to the deal, the dealership. And what the invisible threat is, is that owners or executives, they think they're in the equipment selling business. They think that's

Revenue Is Not The Point

SPEAKER_00 7:23

how they make money by selling equipment. So they'll do anything to sell equipment, but it's all revenue. They don't realize that a dealership is supposed to make money, not just have big, big sales numbers. And like you said, a lot of people from the, especially the sales side of the business, they love the big numbers. Look at all these millions of dollars, we're 30 million or 50 million, 150 million dollar dealership, but your net take home is like 500 bucks. And they're like, how is that possible? I sold all this. Well, because everything's mismanaged. We're we're we're we're not prioritizing things. And like you're saying, we're not in the business to sell equipment, we're in the business to sell money. So, like you're saying, that that piece of whole good equipment, that's the bait. Because if you would set up your PL appropriately and make sure it's it's really reflecting your operation, you will see, and I do this with dealers, like, let's break down all your numbers. And they go, Holy crap, I make that much money on one technician. Yes. So sell equipment. So it's not saying we don't sell, it's it's it's a holistic view. We sell the equipment so we can sell parts and service, and that's where you're making your 75% margin on labor, 30, 40, if not more, on your parts. That's what drives your bottom line profit. You know, once that five or 10% or 1% you make from the whole good sales, once it goes through all the expenses, there's not a whole lot left once it hits the bottom line.

SPEAKER_01 8:59

Your your comment about a technician is is is interesting. It depends on labor rates, but somewhere between $200 and $300,000 a year of labor, and then somewhere between another $300,000 to $600,000 a year in parts.

unknown 9:14

Yeah.

SPEAKER_01 9:16

So just be gentle. You're looking at somewhere between $700,000 and a million dollars per technician revenue. Oh, but that's 25% net if you run your business properly. So they're making $250,000 of profit for your dealership. Find me an equipment salesman that makes you $250,000 net. Yeah. And I'll pay you a lot of money to find you.

SPEAKER_00 9:44

Yeah, and and even I do that that same breakdown. I I don't go to the net, I probably should, but I I just do gross profit and say 50%. And I say, what's your average margin on your whole goods? Like how much are they selling? And we do the math, and it's almost your average technician brings in the same amount of gross profit as your average salesperson. So that's so so give me give me numbers. What's the gross profit for a technician of labor only? Of labor only. You're looking about 250,000. No, no, percentage-wise. Oh, percentage-wise, as in into gross profit percent of labor. Uh 75%. Okay, how many dealerships do you find at 75%? I've got I've got one right now who does about 75%. Um, everybody else is about like 20-30 percent, and that that's why we're we're we're working together, but we'll get it, we'll get to 75. So I I look at a floor of gross profit for labor, 65 percent.

SPEAKER_01 10:48

Yes, I would agree with that.

SPEAKER_00 10:50

Yeah, that's a floor, yeah. Yes. What's the floor on parts? I would say 30 is my is my floor. If you're below 30, there's something I'm thinking why so that's fine.

SPEAKER_01 11:01

So I'll I'll take 40 and 60, just to make the arithmetic easy. 40 on parts, 60 on labor. What's the ratio of parts to labor in dollars?

SPEAKER_00 11:11

Uh it's pretty close to one. Yeah, one to one. Okay, my world is two to one. Really? Well, you're you're you're cat, so you're doing a lot bigger.

SPEAKER_01 11:21

No, no, no, no. If it's if it's one to one, they're replacing too damn many parts. Okay. See, I'm I'm okay. The other thing is where do they get the hardware? Where do they get the seals? Where do they get the gaskets? Is that from their OEM or is it an offsone brand? And and all of this stuff comes in. And the reason I want to go to net, John, you know, labor efficiency in in parts, 50% of the inventory they got hasn't moved. They shouldn't have it. That's why gross is important, but I want to go to net because hey, wait a second, boys. Yeah, if your expense to sales ratio and service is greater than 30%, you're not running the thing very well.

SPEAKER_02 12:07

Yeah, yeah.

SPEAKER_01 12:08

In parts, if it's higher, if it's less than 10%, you're not running things very well. And the other well, we can go this for this forever. So stay with the book. Yeah, so the real people need to be given a holy shit moment. Yeah, yeah. You know, a smack the forehead moment.

SPEAKER_00 12:27

Yeah, so so I tell people like you're in the book, we and I don't want to give everything around the book, but your job is to make money, like profit and and cash flow. And I like to tell people like the bank doesn't care about revenue, the bank cares about cash. Do you have any cash? And and and um that that that that's an I an I an eye-opener as executives owners working with the bank, and they're like, Well, I'm a $50 million dealership, and like, well, you don't have any cash, we're not gonna loan you any money, and um get them to realize like you've got to manage your money, you gotta manage your thing. And I like what you're talking about because absorption has been developed like a way to judge parts and service, but it's really how well are you managing your business?

SPEAKER_01 13:11

You know, is stop there for a second. The guy that created that was Bill Blackie back in the 50s. I offered to work for Bill Blackie. It's kind of a funny thing. He was a Scott, put himself through school at Bradley and Peoria, delivering milk in a horse-drawn carriage. So this guy'd been around for a while. He created parts grams, every procedure, process, paper, etc., for the parts, same thing, service grams. So we had all of that stuff. He created absorption. So I'm I'm talking to him, and he said something, and it it stopped me in my tracks because I hadn't considered it. He said, Ron, absorption's not about the net income of parts and service. As much as it is of constraining the expenses and sales and finance and most people don't look at constraining the equipment inventory. You know, this world has changed. Roughly, and we talked about it before we started, roughly 50% of the dealers in the supply chain, any slight supply chain you want, washing machines, lawnmowers, I don't care. 50% go away every 20 years. It's not because people want to get out of it, it's because people don't make enough money to stay in it. Because it hasn't been managed well. And that's where this book can be really, really beneficial for them.

SPEAKER_00 14:40

Yeah, it shows them like this is the danger, these are the secret threats that you don't see, and and you you need it, you it needs to be brought to your attention. Another one is I call it fight firefighting leader leadership, and they don't know how to manage. And I'm not saying they're bad people, I'm not saying they don't, they're not have have good good intentions, but they just don't know what to do. They they show up a lot of times. I'll see this in like a a store manager who's been promoted

Firefighting Leadership And Coaching Up

SPEAKER_00 15:09

to a GM, and then like a vice president of a region. I had a conversation with one not not too long ago for a fairly large dealership, so I think he had like 10 or 15 locations, and I realized he has no idea what he's doing. And and it's it's not that he was a bad guy, like he was solving problems. Like he he he would fix problems, but the problem was he was fixing the problems. He wasn't coaching and training his people to fix problems. And as I was working through it, I was like, why is the VP of this dealership like why are you involved in that? That's like a branch manager issue. Like, why are you even well, you know, I can't find any good people? No, you can't train your people, you're not coaching your people, you're not explaining, you're not teaching them how how to run. And what I realized is is what happens is is and and maybe it's every business. So I I don't want to beat up on on the heavy equipment industry because it's been very good to me. So, but that's that's all I know. That's what I've done 30 years in. And what I'm seeing is you have executives operating and working as branch managers. They're very tact, tact, tack, tactical, very day-to-day, dealing, putting out the fires. They they are the superhero. And I get it, it's very intoxicating when you're when you're the hero. When you solve all the everybody, nobody can do any. I've heard this. Man, nobody can do anything without me. They always got to call me for everything. That's that's not good. That's bad. That's the bad manager, that's the bad executive when he is needed in day-to-day operations. Have you ever seen anything like that?

SPEAKER_01 16:56

Or am I is it just you know, in our service management classes when I was in the classroom, and we do it online now. I I used to ask the guys in a room. There's 20 or 30 people service managers and foreman, etc., and executives. Stick your hand up if people come to your door and ask you a question. The whole room. How many of you spend at least an hour a day answering questions? Stick your hands up. How about two hours a day? Hands are still there, three hours a day. Maybe a third of them come down, four hours a day. There's still hands up. Yeah. I say, fellas, why do you let your employees park their brains at the door when they come to work?

SPEAKER_02 17:40

Yeah.

SPEAKER_01 17:42

So they say, Well, I gotta answer the question. I say, No, you don't. Well, what do you suggest we do? I say, Okay, John, when somebody comes and asks you a question, the first thing you should say is, What do you think? And then after that's been going for a month or so and people have gotten used to it, the next time they come and ask a question, okay, what's the solution? And if you don't have one, go away and bring it back because I don't want to see it until you bring me your suggestion. Yeah, we okay. So let me get even nastier. None of that comment. Most of the people that are supervising other people don't know how to do a performance review. Nobody's trained them how to do that. More often than not, the I I had performance reviews. I asked my boss, he was the vice president of finance when I'm running data processing. When I was running parts of the service, I always got performance like every day I got a performance review by my boss. But I go into the VP Finance, I say, you know, I want an annual performance review. He said, Did I give you more money? Said, Yeah. He said, Well, that's your performance review. Go away. So I left him. I went out west to another caterpillar dealer. I went in and gave him my notice. I said, Ern, by the way, I'm leaving you. I'm I'm giving you two months' notice. He said, What do you mean you're leaving? I said, I'm giving you a performance review. I quit. And I walked out the door. And he followed me back to my office. He said, You can't go, you can't go. You know it's basic stuff, John.

SPEAKER_00 19:23

Very basic. How long were you in the military? Uh, four years active, one year in the reserves, so five years total.

SPEAKER_01 19:31

In that five-year term, was there ever any doubt about what anybody's job function was? No. Was there ever any doubt about performance? Was there a consequence to bad behavior? No. Have you read my book? No.

SPEAKER_00 19:48

No, but I've been doing this for 60 years, for God's sake, you know. Yeah. And I mean, so that's one thing I talk about is like you've got to have standardized operating procedures. And and I mean, SOP is everything gets thrown around and they think it's just pretty document. But really, what we're saying is you need to know how are you going to run your business. And everybody needs to know what their

SOPs That Create Consistency

SPEAKER_00 20:11

what their what their job is. And so this is what's scary, is that owners don't want that. They want the freedom to do whatever they want to do, however they want to do it, and from whatever day it the day, the date it is that day, because their name is on the sign outside. It's my business, it's my company. I should be able to do what I want to do. And I I tell them, you can, you can do what you want to do. Just write it down and say this is what you're going to do. Because you have to have consistency. If you're going to have best-in-class customer service, best-in-class customer experience, and you want awesome employees, you got to have consistency. Nobody likes the the the the ups and downs. If you're gonna, if you go to McDonald's, McDonald's, Chick-fil-A, all those, they sell consistency. When I go to McDonald's, I know I'm gonna get that crappy quarter pound cheeseburger that tastes the same crappy way at every crappy airport that I'm flying in and out of. When I'm literally going from one flight to the other, it's probably the only time I that I that I eat McDonald's, is I'm going into airport, I gotta grab some food because I'm catching my next flight. There's a McDonald's. I know exactly what that quarter pound is gonna taste like. It's not good. I have heartburn, I pay for it because I'm getting older, but it's the consistency.

SPEAKER_01 21:37

Wait a second, this older crap. Don't even think about that. Yeah, but but stay with that for a second because that's a good metaphor for the equipment business, too. What business is McDonald in?

SPEAKER_00 21:49

The process business. No, no, the customer service. They're in the real estate business. Oh, they are, yes. Yes, they are.

SPEAKER_01 22:02

That's a great idea. The only way that they're successful in the real estate business is if the franchise makes enough money to pay the rent. Yep. That's why they're in the process business. Ray Crock, when he started it, it's it's remarkable. Absolutely. Remarkable, but yeah, we're in the equipment business. Shit, we're in the customer retention business. Yes, yes. Anytime a customer walks away from me, it's a failure. And we don't measure defection.

SPEAKER_00 22:33

Yep. Ridiculous. Yeah. So I'm literally looking at like the manuscript of my book. And number five of what did I call this? Number five invisible threats to your dealership: unapplied hours, firefighting leadership, technician burnout, lack of SOPs,

Customer Churn And Lifetime Value

SPEAKER_00 22:55

number five, customer churn. We don't realize the lifetime value of a customer. We don't, that machine that's out there for 20 years, we don't realize how much parts and service business we're going to keep. And key account management is so key. But they're never developing that that we like relationship. They're always excited about the new customer, the new vendor, the new whatever. Like, let's make them a really good deal. We'll buy, we'll sell these machines, we'll get all their business. But as soon as they sell that first machine, the salesman and everybody else is off to the next one. And they never build, they never build a real relationship and trust with their current clientele. And that's what those customers want. The end user want. Like, I just want a relationship. I just want a partner. When my machine goes down and I'm trying to get it, get a job completed. I need somebody that's going to come to me with solutions. So when I work with my dealers, I tell them, we are the solution provider. We don't sell parts, we don't sell service, rental, whole goods, equipment. We are the solution provider. So you need to ask a lot of good open-ended questions, find out exactly what their problem is, and then we can say, I'll sell you something, rent you, whatever the best solution at that point is.

SPEAKER_01 24:22

Okay, so stop there for a second because you mentioned something to me that's really important. Open-ended questions. People don't know how to ask questions. People do not know how to listen. People don't know what the customer's buying and wanting's needs are. Because we don't ask. Yeah. In the 80s, Harvard Business School wrote a book on the service profit chain that dealt with four elements employee loyalty, best practices process, customer loyalty, and then profit and loss. Yeah. The biggest driver of profit in a business, any business, not just us, any business, is customer retention. If you can improve Harvard's numbers, not mine, if you can improve your customer retention by five percentage points, it's hard to do, but if it's only five points, you're going to increase your profitability by 45%, your net profit by 45%. There's nothing else that does that. But you go out and ask 100 dealers what their customer defection rate is for parts or for service or for rental or for equipment, they won't know the answer.

SPEAKER_00 25:42

Yeah.

SPEAKER_01 25:43

Drives me nuts.

SPEAKER_00 25:44

Yeah. They don't. So I you're totally totally agree. It costs you more money to get a new customer. You read any book, any business book, that's going to tell you you need to take full advantage of your customer. It's it goes back down to the the eight the 80 20 uh 2020 rule. 80% of our revenue comes from 20% of our customers. Take care of those 20% of your top customers. And honest, truthfully, those 20% of your customers would probably pay you another 10, 20, 30, 40% more just for the exclusive service that they get.

SPEAKER_01 26:21

It's funny, you know, the buying patterns, buying habits. I want every customer whose buying habits for the last 12 months in the last 30 days are different. Sometimes it's a family issue, sometimes it's health, sometimes it's money, whatever it is. And then the second, and and I'll call them up. Is everything okay? What's going on? Well, I notice you're not buying as much. There's is there something I can help you with? Customer calls up, they got a complaint. What's wrong? They tell me, okay, what would you like from me? I don't care how much they want, whatever it is, give it to them. That's cheaper, like you're saying, than trying to find another customer to replace them. Yeah. All of this stuff, it's really fundamental things.

SPEAKER_00 27:16

I call it. Yeah. I call it process discipline. You gotta be you gotta know what you're doing, how you're gonna do it, and you gotta stick to it. I had a good day today.

SPEAKER_01 27:26

You know, I went out and I helped John and I fixed George, and he had a problem. That was a good day. Any job I've ever had in my life, and I'm weird, so don't have people follow my thinking, but I tried to work myself out of a job. And every single time I did that, all of a sudden the company found something else to keep me busy. Yeah. I actually went to my boss once, John. I'm running parts and service. I went to the vice president of parts and service. He was a son-in-law, his name was Tom Sanderson. This is years ago, and I'm sure he's passed, so I'm safe to say this. Said, Tom, I don't have enough work to do. So what I'd like to do is uh uh uh give me more work, or I'm gonna leave every day at noon. So a week went by, nothing happened. Second week went by. Monday I went home at noon. Tuesday I went home at noon. Yeah. Wednesday I got a phone call. You're leaving in noon. I told you I was going to. I told you to get me more work. I haven't got anything. What do you want me to do? Sit here and read a book from 12 o'clock to six o'clock at night. He said, I'll find you more work. Believe it or not, I went back and did it a second time. He said, get out of here. I so I I think um it's the same. Yeah.

unknown 28:46

Yeah.

SPEAKER_01 28:47

So what's the old rule of thumb? If you want something done, ask a busy person.

SPEAKER_00 28:51

Yes. Yeah. And you know, you you you know, you talk about like people don't know what to do, and that's part of you know, having your your processes, and so because they don't know what to do. And so if they're training themselves, and so this kind of leads leads leads me to culture, right? And so I'm I'm a big culture. It is culture, it is culture, and I'm not talking about the warm and fuzzy, the HR person hires somebody and we're gonna do, I'm gonna fall backwards and you're gonna catch me, stuff like that. I'm not talking about that. I'm talking about real culture. And so I wrote this somewhere along the way.

Culture Built By Tolerance

SPEAKER_00 29:33

Um, what we celebrate and what we tolerate as leaders, that creates culture. That's that's what creates culture. And and what happens is the salesman who is lying and unethical sells a piece of equipment they've been trying to sell for the last three years because you shouldn't have had have ordered that piece of equipment from the get-go. He gets the high five. You know, the the whatever, so whatever you get high fives for, that tells your employees that's what I need to focus on. And so I see a lot of leaders will start celebrating things that they shouldn't celebrate. And then they tolerate a lot of things that they should because they they don't like confrontation. They don't like accountability. And so I'll put it this way um just like a parent, if you love your children, you will discipline your children. You will, i.e., hold them accountable. So, accountability, one of the things, another hidden threat of to a dealership, there is no accountability. And basically, the the leader, the owner, the VP, whoever doesn't care or love their employees enough to hold them accountable. And so the employee doesn't know what to do. And they're like, Well, I do this activity and I get a high five. I continue to do these activities, even though it doesn't feel right. It's I don't think it's my job, but you know, they don't say anything, you know. And and so they're thinking, well, that's that's okay. I do this, I get high fives, I behave like this, nobody says any says anything. And and that builds culture. And and that's that's what's wrong. It's people are like, why does nobody work? Why, why is it that nobody like you said, like I always I'm the same way. I always tell people, you've got to work yourself out of a job. You're never gonna get promoted up, you're never gonna move up to bigger and better things. And this is a scary fact. If you work yourself out of a job, you may move up to bigger and better things, but it might be someplace else. And a lot of a lot of people and to and in today's world, that's really valid, John.

SPEAKER_01 31:56

And and you know, as a guy who went to school in the 60s, when I left university, everybody, and it was a tough market, 1968. I wanted to work for IBM, IBM wasn't hiring. And everybody said, take your time, Ron, because wherever you're going, you're gonna be there for the rest of your life. That 40-year career is not true anymore. Today, my daughter, who's 50, when she came out of university, well educated, very smart, she's I think now on her eighth or ninth career. My granddaughter's got a master's, my grandson's in the Navy. We talked a little bit about that beforehand. I don't know how many jobs they're gonna have. Yeah. One of our contributors, Ed Gordon, wrote a book a number of years ago called Job Shock. And it said, he said, that in 2030, now we can argue about the date, 50% of the American workforce will not have the skills to be employable. Might not be 2030, but that's coming. Unless you retool, you re-educate, you continually learn. Yeah. Learning's a lifetime process. Too many people think when they leave school it's over. That's when it starts. Yep.

SPEAKER_00 33:25

So a funny story to to prove your point. So I got my degree later later in life. Um, and so I got a job with uh a C C and H I, K case New Holland Industrial. I worked on the Case IH brand. Uh, to have the job that I had, you it was required to have a bat a bachelor's degree. Um so my group that I that I was in, my my team or whatever you want to call them, department, uh, we were on a a team building event. And um, so they were complaining. Now I was performing really, really well compared to everybody else. Um, and it's because I just learned to usually keep asked ask a lot of questions and learn, figure out, you know, this is this is what a winning looks like and figure out how to get there with help of other people. And so they had no idea that I was one of the guys who had been recently hired or hired within the last year who did not have a college degree. And they were going on and on and on. And one of them said this I've worked really, really hard to get through school to get a good job. And now they're just giving it away to people. And the mindset was, like you said, I'm gonna work hard through school, and then I'm done after that. Like I've made it through college. Now I'm gonna sit back and relax and get a good cushy job. And and it's like, no, you never stop learning. You you you never you never stop. And it it's it's I got I earned that job, and I and I I performed it very well. Um, and one reason I I got a degree was just uh shut everybody up because they were asking me, well, what school did you go to? And I was like, Well, I didn't. And they were like, Oh, okay. And I was like, All right, it's free. I serve my country, I'll go out and get it.

SPEAKER_01 35:19

And so many, there's so many things that are flying through my head. I took mathematics and physics when I went to university. That was my major's, and my minors were computer science and statistics. And I was 16, not because of my brains, but because of my birthday. So I go to school in September, and by February or March, it was very clear to me, unless I was gonna get a master's or beyond, this was much too specific for me. I'm a generalist, yeah. Um, you know, I'm not gonna be a surgeon, I'm gonna operate on hearts, I'm gonna be a general practitioner, I'm gonna, you know, and I call doctors today, I call them plumbers and pill pushers. I don't find doctors that are trying to help people avoid illness or live a healthier life. And that's exactly what you're talking with with the culture. So one one of the things that flipped through my mind is okay, how many people you got in your parts of her? 20. Okay. What's the average payroll for those guys? That's benefits in everything. I'm gonna make it easy for call it 50 grand. So that means I've got to get a million dollars to pay for my payroll. Yeah, 10%. So that means that the first ten million dollars, the company gets nothing. It's just paying for us. What's your purchase? Eight million. Holy shit. Who's the two or four people you're gonna let go so that you can pay for yourselves? What are you doing? What are you talking about? Think about it. Yeah, how do you earn your salary by making money? And then another exercise I used to do all the time in consulting job is what I call five things. Yeah. Make a list of five things. Keep silent, write them down that you'd like to change in your job to make your job better, easier for you. Yeah. Okay. Then what are five things in your job that don't talk that are a pain in the butt to do? Okay. And then what are five things that you could change that would make the company more money in your job? Okay. So I got three lists. I got twenty people in that parks department. So we start writing them up on a board, and we get rid of the duplicate language, so we end up with ten things for make it easier for me. Ten things that are a pain in the butt, ten things that make more money. How many do you think are on all three lists? Those that's a sweet spot. The ones that are. And if they're a pain, my question to everybody at that point is if you all acknowledge that these things are a pain in the butt to do, who's doing something about getting rid of it? Nobody. Yeah. How do you get and it and that's a culture issue too? That's a leadership issue. Yeah. You find something you don't like or you think you can do it better. I want to know about it. Stick your hand up.

SPEAKER_00 38:41

Yep. Yeah, I call them, I call them uh friction points. Like, what's a friction point? We want to be, you know, slow is smooth, smooth is fast. The name, the Navy SIELS, that's one of their saying. If you've ever read Jocko Willock's stuff or listen to his podcast, and so I call them friction points. Like, what's the friction point? And because usually, um, so let me take a step back. So we get to culture. So I love SOPs. So I do SOP projects with my dealers, I help them write them, and you know, but my SOPs are more the why and the how versus step one, step two, step three, because those we can create those two. But really, we need to understand the why and the how. And so when we talk about these friction points, it's really like you said, it's the culture thing too. And so let me take another step back. We talked about executives in our industry don't know how to operate as as executives, right? They just solve the problem, they micromanage, they're constantly looking at numbers. Give me these numbers. What are you doing on this? So I am I am I am a mechanic. I I'm I'm not a simple, I'm very simple thinker. So hydraulic fluids, the way that a hydraulic system works, it follows the path of least resistance, right? Hydraulic fluid, electricity, air, anything will pass will will travel the path of least resistance. If we want an employee to do this, remove all the friction points that makes this hard to do, and make this the easiest thing for them to do, in which we can do that, right? We are executives. We're the owner, we're the general manager. Make this the easiest thing to do, and they'll do it. And you don't have to micromanage them. But what most owners do, they make this the most difficult thing to do, and then they micromanage and beat that. Do this, do this, do this, do this, do why aren't you doing this? But all their processes, all their technology, everything that they've got structured, their culture is makes this the hardest thing to do. And I'm thinking it's just a self-defeating process, and they don't see it, they don't even realize it. And this is what they say. You hear things like, Well, this new generation just don't want to work. You know, you got to tell them how to do everything, like any dumb thing you can think of to say is like just make it easy for them to do it. That's what they do.

SPEAKER_01 41:21

One of the interesting things I used to do to people is okay, what stands in your way? Mm-hmm. You're being able to do a better job. And they'll tell me. It sounds like I'm trying to help. I said, Okay, let me do that for you. Is there anything else? No, if you can do it, boy, that'll make my life better. Yeah. And then I looked them in the face and I said, You know, from this point forward, you're standing naked in front of me. If you can't do that job well now, what's going on? And Harry Truman, everybody knows about Harry Truman because of the fuck stops here. Yeah, he's got a better one. If I have to do your job for you, I really don't need you doing. Yeah. And I want people to be so interested in their work that they'll make it impossible for me to replace them. Now that's when working yourself out of a job scares people because they want to be safe enough, they want to be secure enough that they can never be replaced. The only way you're gonna get ahead is if somebody else can take your job over. Yeah. This is you know, it it's it's big your your leadership statement. Jay Lucas, who who is the largest recruiting company in our industry and the equipment world. Who who's who's my old boss? Yeah. Jay Jay Lucas, Jordan Sitter. I mean, he's a great, great guy. He is. And you know, we we talk back and forth, and I say, well, you know, why don't we do something that write me something, and we'll put it up as a class, we'll put it up as a lecture, whatever, on performance reviews, how to do it. Conducting an exit interview.

SPEAKER_00 43:09

Yeah, those are important. Oh, hell yes. Process discipline. You don't leave until we do this. If you want your final paycheck, we're gonna do this this review.

SPEAKER_01 43:18

So I've done a lot of things in my life. I've been very lucky, I've been blessed actually, but I worked in a prison for a while. And I was trained on personality profiling such that everybody who came to the prison, when they arrived, I spent a day with them interviewing them, having them do tease tests, and and then we put we put we created a treatment program for them to help them rehabilitate. That's probably one of the most significant pieces of learning I've had in my life. And today we have so many tools. You know, it's it's really strange to consider, you know, starting in the 60s and and and living still in the the 2025s and beyond, the twenty thirties, let me call it. The change that we've seen that makes our lives easier, that makes our jobs easier. But scared the hell out of everybody. Yeah. Artificial intelligence has got everybody goosey. Data analytics, which is the real deal. You know, we've got life cycle

Data Visibility And AI Reality

SPEAKER_01 44:29

management now that we know from the time of birth to the time of death, how long and what the consumption is to the parts and service for every operating hour and every work condition is this. So we should be able to go to every customer at a precise point and say, you know, you can get the maximum trade-in value at this point because the used equipment market is that, and your operating cost per hour at this month. Yeah. Nobody does that, John.

SPEAKER_00 44:55

No, data. So you brought a good point out. So visibility. Holy crap, really? I'm teasing it. I know it's visibility. Like you got to have the data. And we have with the AI, everybody's scared of it. I wrote an article and said it doesn't matter if you like it, don't like it, it's here. It's like you you have to embrace it. And we've got 50 years of data in our business systems that we don't even use, you know. And um, and so, anyways, that's a key. One thing you asked me what I was working on and stuff. So I've just brought on a data science scientist um at service by the boxes. And so I brought on two, two, two employees. So we're we're three people now, um, counting my daughter who does help me with my bookkeeping in my lab Mavis. I guess we're at five. Um, but we realized they got to have visibility. You've got to have the data, and you have to act on the data. And there's a lot of information out there. You know, we were talking about like a different like net margin or gross margin for different departments. Most dealerships don't even track that. They have no idea what you're even talking about. They're and so I say, well, how on earth do you know what department is is making money? Well, the sales is because it's big, more more, more zeros. And so when I start working with their numbers, they go, I'm not making very much money on sales. I'm really making money on service. They're like, yeah, that's you need a higher tax. You need to invest in hiring technicians to make more money. But it's the data, like you're saying, you've got to be able to process it. And you know, everybody talks about AI. You there's so much data out there you can't process it. You've got to have something else to be or or pay, you know, a data scientist $100, $150,000, $200,000 a year, but then you got to have four or five of them. I mean, just like it you can't, but AI can, you know, if you have the right structure. But I don't know, we could go on a rabbit hole on that.

SPEAKER_01 46:55

But oh well, you know, just and and the one that pops to mind instantly is medical. MD Anderson, good friend of mine's on the board, is digitizing all patient data in America from the year 2000 to 2020. And just consider all blood work, all x-rays, all doctor visits, everything. And and doctors are noticed for being terrible business people. But imagine I'm 80 years old. Imagine I go to my doctor and I have my blood work and he does CT scans on my back and all the rest of this stuff, and he's got it all there. And I'm 80, I live in this place, and everybody who's this age in this country has a life expectancy of X. So I had one of those my doctors return. His name's Mario Silva, I call him Super Mario, I'm giving him the Mario hat. Yeah. And and and it's interesting, your your final discussion with the doctor who's going on to other places. He says to me, Ron, what do you think you're most vulnerable to as a person? Because he's already said, I'm gonna live 10 to 20 years. And I said, I have no idea. I I said, you know, I gotta be maybe a little bit more careful with driving, although in Hawaii that's not much of an issue. He said, No, what you gotta watch for is falls. I said, What do you mean? He said, People over 80, over 65 that break their hip have a life expectancy of 12 to 24 months. I said, You gotta be kidding me. He said, No. How come people don't know that? How come you're not how come doctors don't talk about nutrition and and exercises to strengthen you, you know, all this stuff. Yeah, equipment. We have GPS, we have sensors and machines everywhere. We know when the engine's idling too much. Anybody go out and say to hey, Mr. Operator, you're only using 50% of the machine, or it's overheating. Do we call them up and say, Shut that damn thing down? Or your air filter is plugged. Wait a second, the machine's in the shop and it's got a competitive filter on that machine, oil filter. Yeah, I just give the damn things away. I'd call a customer and say, I'm replacing your filter. He says, No, no, no, I like that filter. I said it's free from me. And everybody'd say, Well, why are you doing that, Ron? Well, we don't do maintenance on equipment very often. What we're talking about, we do maintenance. I said, Yeah, what's your market share for maintenance? Yeah, you know what the number is five to ten percent. Yeah, okay. So an independent mechanic or an employee of the customer changes the filter. What filter do they put on that machine? They replace whatever brand's there. Oh, it's my brand. Maybe they'll replace it with my brand. Silly little things, yeah, comes from what I call scars. That's why the company we have is learning without scars. I've got the scars, you don't need to have them. And you're doing the same damn thing, John. Yep, you're trying to open people's eyes to make their life easier, to make it more profitable so they can enjoy life more.

SPEAKER_00 50:18

Yeah. Yeah. So funny you bring that up is so I was, you know, Jay Jay Jay started a podcast, and so I was on his podcast. Heavy hitters or something, right? Yeah, heavy hitters, yes, heavy hitters. It's pretty good. Um, well, at least that they have the at the ep the heavy episode that I was on, I thought it was pretty good, but um just joking there. But uh I was talking about it's okay. I was smiling. Uh I was uh talking um one part of it. I just did a short uh on my YouTube channel or someplace about this one section. It's like my book, Service by the Boxes. Like I remember at one point I cried out to God, like, God, why does everything have to fail? Like I like everything that could possibly go wrong has gone will will will go go wrong with me at this service department. And I'm trying to do everything right and everything's going wrong. And but I tell people, I've been through hell and back. Like I've I've got the scars, I've learned the hard way. My book, Service by the Boxes, my new book, what's really holding your dealership back is based off of 30 years of things that I've seen happen. And you don't have to to get like you're saying, with learning, learning without scars. You don't have to learn by scars. Like there's been people who have gone before you that's experienced, like just learn from from our mistakes, learn from our from our our our success. And that's what I tell people. I'm just trying to help you. And people ask me, what John, what what what do you do? And I said, I help dealershipships make millions of dollars. I used to I I always have this crazy statement, and I was like, that's what I do. I help dealership make millions of dollars. You pay me a little bit, and I ensure you make a lot of money, and you're gonna make a lot of money. And and it it's you don't have to make it so hard on yourself.

SPEAKER_01 52:16

It was really funny. I I was brought into the States to run a software company called DBS, and it was a company owned by Clint Merkison, who was one of the wealthiest men in the country. His father found the West Texas oil field, middle of this, where George Bush is famous for making his money. And he got a master's out of MIT in mathematics. And when I met him, he had a disease, he was not able to communicate orally, he had to write things down. It was a shame because the man is smart like hell. And I was hired, quite frankly, to sell the company, package it such that it could be sold because it was transitioning from a service bureau to an interactive to an online system, and they yeah, their head couldn't get around that fact. Well, we started succeeding, so I'm I they were in Dallas, I was in Denver, so I go down to Dallas. I said, you know, you might want to keep this. Why? Well, we're selling 10 to 20 systems a month, and you didn't used to sell 10 a year because nobody wanted to sell it because you're making it's a cash cow with service bureau, they're monthly, you know, all of that stuff. It's the same thing with rental equipment, it's the same thing with why don't we sell a machine by the operating hour? Instead of charging five hundred thousand dollars, why don't I charge you six hundred and forty-two dollars in operating hour? And I'll pay you every month based on what the hour meter is. Yeah. Well, you you you can't do that. Well, you yeah, you gotta have money. So your manufacturer is concerned about keeping the production line running. And they know that next year the forecast is gonna be for things to be down. So you know what they're gonna do to their dealers, they're gonna go out and say, John, I need you to give me an order and I'll give you terms to next June. Yep. And that's fine. Their problem's solved. Your problem's about to hit you between the eyes because in June you gotta come up with the cash. There's so many things that if people just think walk over the wall, get out of your comfort zone, and people don't do it.

SPEAKER_00 54:40

No, it it it's I tell people complain about everything, right? Every I so I I I got I go from New York to Florida to the West Coast, South Texas, everywhere, right? Majority of problems are are pretty much the same. There are some little unique stinks here here and there,

Proactive Growth In A Shrinking Market

SPEAKER_00 54:59

a nuance, different brands, different cultures and things. But at the end of the day, I tell every single one of them like the problem that you're facing is the same thing as the cat dealership facing down the road, or or the John Deere dealers facing over there. This is what separates uh the boys from the men or the girls from the ladies, want to be politically correct. Is that we, if you want to be successful, you find a way to be successful. In the Marine Corps, we call it improvise, adapt, and overcome. Everybody has the same problem. We have to figure out a way to solve it. If you figure out a way to solve that problem, whatever it is, technicians, parts, you know, too much, too many competitors just to sell equipment, whatever it is, a down market, uh in interest rates are too high. If you can get creative and find a way to solve that problem, you will be successful. But it takes hard work. And what I've learned, and Ron, you probably can contest to this, is we live in a very reactionary industry. I'm gonna sit here and I'm gonna wait till somebody calls me and says, Can I give you $250,000 for a piece of equipment? Or they're gonna bring in a machine and like, can you fix my machine for me? I literally was working with one of my dealers' locations and I was talking what how what they're doing to drive sales and stuff, and one of their service riders told me this said, like, almost quote, we have really good customers. We don't have to call them, they just bring us work. And that's why you're the worst performing location in the whole dealership. I didn't tell them that. I just go, hmm, that's interesting. And and and they they don't and so they manage their technician headcount, the parts, everything to the level. It's like there's this breaking point. Like if I have five technicians, that's just enough to keep up with everybody. When I get slow, I'm not too slow. But if I get that six or seven, I might have to pick up the phone and call a customer to try to drum up work. I might have to do a machine inspection. I may have to start doing PM work to keep my technicians busy, right? And it's like, no, be proactive. Try to figure out a way to provide solutions to your customers. Be whatever the obstacle that comes your way, fix it, solve it. And then you will blow because like you said earlier, I'm not sure if it's before our conversation or during the podcast, is that the the the um cat has like went down what 50% of their dealers? They have like half the dealers they had before. Canada has like what one or two cat dealerships, have one John Deere dealership. That that's coming. It's it's gonna, I was talking with a a dealership, single location, and they had a six location, same brand on this side of them, and then had like a behemoth 20, 30 location. And I said, You need to paint the building, you need to make your numbers look as good as you can, and then somebody's gonna sell you or somebody's gonna buy you because there's there's no place to go. So you just need to increase your your valuation any way possible because you can't expand. There's you know, and it's just it is what it is. Um, what's your thoughts on that?

SPEAKER_01 58:30

Well, I I used to go in to new dealers, whether it was a client or not, I'd pick up the phone at the counter and I'd put the phone by the guy's ear. I said, What's that wrong? They're looking at me quizzically, and he said, Well, it it's it's the dial tone. I said, Yeah, how often do you hear it during the day? Yeah. And the answer is never. Because they pick up I had eight guys in the counter. This is 1969, maybe 1970. And I'm running the parts business or a cat dealer in a store.

unknown 59:06

Yeah.

SPEAKER_01 59:06

So it's just Montreal. And my cubicle is facing the front door, it's right in front of me. And to the right, as I'm looking, is the telephone operator in a small sitting area for people waiting to be greeted. And on the left hand side, as I'm looking out, there's a counter, and there's eight guys. And in those days, the counter was chest high, like a bank, you know, we got because we had to store all the books underneath. Yeah. And it's a Friday afternoon, and it's busy. And the owner loved Bob Hewitt, it's a wonderful guy. He loved it when we were busy. We only had two shipping and receiving docks because he wanted to look busy. He wanted us to have people parking down the road. A guy comes in about three o'clock in the afternoon. He looks to the right and he sees all these pictures. He goes to the left and he sits down. And I'm watching this. He picks up the phone, dials a number. I can hear the operator's phone ring and her answer it. And then I can, it's transferred to the parts department. And I watch, and there's a customer, a counter guy is serving a customer. He says, Excuse me, sir, I have to get that phone. He leaves the customer, which was very common.

SPEAKER_02 1:00:18

Yeah.

SPEAKER_01 1:00:20

Takes down the order and all the rest. He goes back and forth with the customer. Who's standing over there? At the end of the customer, the order, the salesman says, Okay, that's is that everything? Yes, it is. Where do you want me to ship it? The guy stands up and he comes around the corner. He says, I'm gonna pick it up. I'm over here. We were training our customers that they got better service if they didn't come in. Yeah, I would kill to have a customer come to my store. But we were forcing them away. We're we're we're running out of time here, John. But I think this has been an interesting and I wish you all the best for your book. And I've read Service by the Boxes, and you deserve everything you're getting, man. It's wonderful. Yeah. So thank you. How would you like to wrap this up?

SPEAKER_00 1:01:06

I would wrap it up. One of my final chapters in the book, what's really hold holding your dealership back. Like I said, I'm giving it away before it goes to print. Just go to Service by the Boxes. Um, and I I'll send you a link, Ron, that that that's will go straight to your landing page so they can just click on it, goes right to it. Is is

The Cost Of Doing Nothing

SPEAKER_00 1:01:28

I call it the cost of doing nothing, of just kicking the can down the road. Like you, you know there's a problem. You know that something doesn't feel right. Like you're busy, but the numbers don't don't add up. The the the CPA is like, hey, this doesn't, something's not right, you don't know what it is. Don't do nothing. Give me a call. I mean, I'll I'll talk. Anybody who's ever talked to me, met me at a conference, listened to when I went to one of my speaking sessions, I'll talk to you all day. Like we did how much time do we just talk? Um, my daddy always says, John, you have the gift of gab. So if you don't know what to do, but you're like, I want to be best in class, I don't want to be a meet a meet mediocre dealership that gets bought out. I want to have a multi-generational company. I want to build something that that I that I that I can be proud of. Like if you want to do something different, something great, something big, call me. We'll have a conversation, we'll talk for an hour, two hours, I don't care. And if something works out of it, great. If we just exchange some great ideas and I get some good information to write a new article, blog on, great, right? It's a win-win. But I I really am here here here to help. And you can reach out to any of my dealers. Um, and my book, what what's really hold hold hold holding your dealership back. I got a whole section of people that I've worked with that will tell you, you can call them, you can find them on on LinkedIn or whatever. I'm a straight shooter. I'm a little blunt. I may I may hurt your feelings a little bit, but that's my job. And um, if I can help you, let's work together. Let's just build something great together. Like let's make millions and millions of dollars together. Or the cost of doing nothing is you're just gonna slowly erode away. And um, one day there's gonna hang up a for sale sign, and everybody's gonna say, What happened to that dealership? So it's your call. Don't do nothing, do something, decide to be a leader and and lead and lead your company to greatness.

SPEAKER_01 1:03:36

Thank you very much, John. I've I've enjoyed this. And those of you out there, I hope you've enjoyed it as well. There's an awful lot for you to consider here, and I hope you enjoyed this candid conversation with John. And I look forward to having you with another one in the very near future. Mahalo.