Lets continue on the methods of target from last time.

DustyMoto: I assume you all know that I work with DustyMoto and this is a little self serving, but that’s OK because it is all true. DustyMotos primary focus is OEM hard parts and accessories found on your 9 month no sale. Our approach is a departure from the normal supply and demand model of business. We use the demand of our 1100 member community to consume supply. This supply is your, and many other dealers, 9 month no sale. Since it is such a departure it does take some understanding to really see the power. The main points are; 1 recapitalizing a dead asset, 2 DustyMoto does all the work, 3, your participation pays it forward.

Lightspeeds Parts Finder: This is a valuable tool when it comes to finding a specific part when there is a supply issue. It does, however, contain your entire parts file, not just your 9 month no sale. One restriction is you must be on Lightspeed NXT and subscribe to this service. It is not a good way to focus only on your 9 month no sale, but it is a good tool for commerce. So if you have NXT, you should have this tool in your arsenal.

OEMs return accruals: This is the most often underused tool in the dealers arsenal. The biggest issue is you have a certain window to get your RA processed and it is very easy to miss. Each OEM has their own guidelines you must adhere to and each one is a little different. The good thing though is that the OEMs are sticklers about policy and procedures manuals. If you dont have one, call your OEMs parts help line and request one. Then compile all your OEMs into your own dealership Policy Manual for RAs. The set calendar reminders for all your windows just to make sure you don’t miss it. As far as what you send back, you should only be sending items found on your 9 month no sale report. A lot of guys will just go pull parts off the shelf until they have enough. Make your RA impact your 9 month report 100%.

Min and Max settings: This is a very useful tool that most current DMS offers. It allows you to keep a set number in stock of specific fast moving parts. If you don’t use this tool, start using it right now. If you do use it, evaluate what levels your keep and see it there is any room for reduction. The standard rule is 4 turns per year stock levels, but if you are struggling with cash flow think about reducing that on some of the readily available things like plugs, filters, pads and the like. You may sell 100 each year of something, but do you need to stock 25? If you can get all you want delivered tomorrow, and you have multiple suppliers, think about reducing it.

Do me a favor, if you haven’t subscribed yet to the series click here and put in your email address.

This will give you some extra content and view points and will allow you to give your input if you so desire. As always your email will be held in confidence, we don’t share or sell them. And just so we are clear, this is FREE, I’m not going to try to up sell you later. Join in….

Bobby Franklin CEO,

DustyMoto

bobby@dustymoto.com

twitter: @dustymoto

Methods of target. Lets quickly review some tools at our disposal. Go over strengths and weaknesses and determine what areas they are effective in.

In Store Clearance: This is a good tool for a few reasons. It can allow you to sell specific items you choose from your 9 month no-sale inventory, and it can give special deals to your customers in your store right now. Create a section in your showroom for this and mark it clearly. Keep it stocked, organized and labeled by fitment. A good tip is to include items that require others to work. Example; a back rest requires side arms and a pad, and you have one or two on clearance out and one at retail. Even if you have multiples of one item, you only want to have one in your clearance area. If you only have one, your customer may purchase it because they don’t what to loose out on the deal. Perception is reality. Encourage customers to check back for new items added, it can be a good way to get a few repeat visits. Remember, you want to recoup your money, not necessarily make a profit so be aggressive on your discount pricing. Some people go crazy on a deal, so give them one.

eBay: eBay is the yard sale of the Internet. It is where you go to find deals. You may think of eBay as auctions, but in truth you will have the best results with the “buy it now” listings. You will not make a profit and any one telling you different is stretching the truth. It is, however, a good place to recover your cost but you have understand how it all works. First off, eBay charges a listing fee, a final value fee, and Paypal charges you to handle the payment side of it. A safe estimate is you will have approximately 15% in fees on every item you sell, so you must factor that in. One area often overlooked is that the listing fee is charged every month, not just when you list it. This is important because you have the option of listing your item as “good till cancelled” and you may not sell it in the first month. So, you must be selective on what items you list. Garments and Accessories are the only items you should list on eBay. Hard parts do not sell because they are so specific. UPS or USPS shippable is a must, oversize items are too expensive and are a headache. Pick G&A from your 9 month no-sale and do a little eBay research. Type in the part number and see what others have it listed for including shipping and how many are listed. You can also see past sales history if you are crafty. If you list your item, you want to be the cheapest including shipping, remember this is a yard sale, loyalty does not exist. It is all about the price so if you can be the cheapest AND recoup your cost, then you should list it. Don’t forget about the 15%+ you’re going to pay so factor that in. You are also going to have to assign a staff person to manage it to the tune of 10 to 15 hours a week so keep that in mind, as well.

Craigslist: Craigslist is the weirdest thing on the net. No kidding. But for your needs it can be a place to move some over-sized items and even some used items. If eBay is the yard sale of the Internet, Craigslist is the swap meet. It’s usually a regional reach and is affected by timing, because your ad starts at the top and is moved down the page by new adds being posted. The good thing is that it is free, so you have nothing to loose.
Next time we will talk about others like DustyMoto, Lightspeeds Parts Finder, OEMs return accruals, and Min and Max settings.

Do me a favor, if you haven’t subscribed yet to the series click above and put in your email address. This will give you some extra content and view points and will allow you to give your input if you so desire. As always your email will be held in confidence, we don’t share or sell them. And just so we are clear, this is FREE, I’m not going to try to up sell you later. Join in….

Bobby Franklin CEO,
DustyMoto
bobby@dustymoto.com
twitter: @dustymoto

Lets talk about the inventory represented in your balance sheet and how we can break it into segments. The purpose of looking at your inventory in segments gives you several views to help you manage and monitor your progress.

Fast Movers: This segment is where you make most of the profit in your part department. A good rule of thumb is items that turn over (sale) at least once every three months. This segment is what I call the working inventory. It does all the work making profit and carries the other two inventory segments. They consist of your service items like oils, filters, plugs, tires, brake pads, etc, and the G&A you sell regularly.

Slow Movers: These parts are the ones you sell at least once every 9 months. This segment still has a chance to sell but you have to be proactive to make it happen. This is your lazy parts, they just lay around doing nothing and every now and then they will contribute to profit.

Non Movers: This is the 9 month and older segment of your inventory. This is where the example of the apple merchant and the shelf life of apples comes into play. These parts have remained unsold for 9 months or more. In reality this segment is a total loss for our businesses. Think about it this way, we have invested our profits into parts that it turns out have went stale and rotten on our shelves.

Now that we have the segments defined we can see that the Non Moving segment is the one we should be focusing on reducing. The Fast and Slow movers will either continue to turn, or will end up in our Non Moving segment eventually. If so, we will deal with them then. One thing you must remember is you long ago paid for ALL the items in this segment. Our approach should be one of recapitalization, not one of profit. My point being, if you were going to make a profit, you would have done so by now. Our goal should be in getting as much of our investment back in an efficient, monitored, and managed process while eliminating the practices that caused it in the first place.

So, back to using our P&L and Balance Sheet as one report. We know the one segment of inventory we need to really focus one is the 9 month no sale (Non Movers). And since all the DMS can easily spit out a report of this segment we should use this inventory segment as our inventory baseline to use with our P&L. More specifically, we should use the change from month to month of this segment. Remember, you own this inventory out right, so the more you reduce, the more you add to your operating capital. (Note* One exception: Writing off and disposing of your inventory. This does not work in this process. If you write it off it is now at zero, but you have also generated zero income. I know I’ll get the comments, so I wanted to address it.)

The biggest reason I recommend using your 9 month no sale instead of your entire inventory file is to avoid counting a sale twice. Your entire inventory file contains your fast moving parts that you are going to make a profit from during the normal course of business. To count any reduction because of this as additional cash flow would be misleading. Also, using the 9 month no sale allows us to by pass any dating or net 30 terms issue. Most of the time we pay next month for the items we sell this month so in true cash flow implications, it could get very confusing.

I am going to create a spread sheet to allow us to track our progress. If you would like a copy, just subscribe to this series and I will send it to you for free. The object here is to use this increase or decrease of our No Sale segment to boost or reduce our profit on the P&L thus giving us a more accurate view of the profitability or our parts dept. With this process, we will no longer have profit hide on our balance sheet.

In Part 4 we will get a little deeper into this. Also, some of the things we will cover in following segments will be: methods to target, getting your staff on board, additional measurement tools, and long term implementation.

I am continuing this series over several weeks. If this is interesting to you and you want to subscribe to the series click here and put in your email address.

This will give you some extra content and view points and will allow you to give your input if you so desire. As always your email will be held in confidence, we don’t share or sell them. And just so we are clear, this is FREE, I’m not going to try to up sell you later. Join in….

Bobby Franklin CEO,

DustyMoto

bobby@dustymoto.com

twitter: @dustymoto

By Todd J Smith

Man, I hate these.  I see them all the time when looking online for info about a new DustyMoto account.  You know how it works … You Google the business in question and there’s a Yellow Pages review or Super Pages or Manta, etc, with some jerk broadcasting his douchebaggery for the entire world to see.   There’s not much worse than disparaging your local powersports retailer, in my opinion, and we all have stories about “that guy.”

Whether it’s the Goldwing Riders club member (whose meetings you host and you buy the coffee and donuts for) trashing your service department from your own parking lot to his pals or the new Rhino owner that said on his customer satisfaction index (CSI) survey that you had nothing in stock for his new machine when you have two walls full of the stuff and clearly remember him refusing every attempt at accessorizing, it stings a bit.  You remember bending over backward for this guy and he flat out lied..  

Of course, he’ll be back looking to leapfrog other service customers and then beat you up on his discount.  You owe him, right?   Here’s an actual Google review from the very first DustyMoto account holder I keyed in for this exercise: 

“Posted by Jonathan  ********** is pretty overpriced on just about everything. They once improperly installed my front sprocket causing the oil seals to come apart an hour into riding. I noticed it when my bike nearly went down in a corner due to an oil coated rear tire and chain. I had to trailer the bike home because all the oil spilled out. They fixed the sprocket and replaced some parts free of charge but I’d never use their service department again.. Doing the work on your own bike is the only way to know your safe I suppose. I go moto shops for tire tubes and to try stuff on before I buy it online. BTW most shops price their bikes 2000-4000 above cost so negotiate when you buy new.”

Sheesh.  I’m sure it had nothing to do with his 12 hp gasoline pressure washer.  I suppose you have to take the good with the bad, right?  Not to me.  Lots of people will tell you to leave that kind of thing alone.  They say, “at least they’re talking about you and that’s not all bad.”  I have to throw the BS flag on that.  Maybe I’m wrong?

What if that person’s gripe was addressed by you?  It wouldn’t have to be ugly, but a calm statement of your interest in satisfying this … person.  I’m of the thinking that such negativity should get addressed for a few reasons:

• Potential customers will know that you are interested in what your existing customers have to say and that you want them to be pleased.
• Negative posts will be weakened to some degree by your attention regarding their issue.  It will remove the negative emotion’s power.  You’re introducing a sliver of doubt to the interested reader of reviews at the very least.
• You can’t solve every issue, but the effort is what matters to people reading those reviews.
• Not all free press is good, in my opinion.  Bad press can turn good if you take an interest.

Of course, there are always at least two sides to every story.  Also, the Internet has given people the power to say what they want, no matter how truthful, and be as tough as they like from the safety of their keyboard.  Plus, how often do we see positive reviews?  Getting taken care of doesn’t invoke an emotional response or a desire to get even so folks just don’t make a habit of it.  Therefore, you can’t rely on your happy customers defending you.

Since the Internet is a free forum and the negative things people have to say do carry weight, why not do a bit of maintenance on your own reputation regularly?  Don’t get into a shouting match, but let it be known that it matters to you how you are regarded publicly.   Do you want to see what people have said about you?  Google your business and click on anything with reviews.  It will take almost no time to dig up a bunch of reviews and respond to them.

It could mean thousands of dollars in revenue that you might not otherwise see. 

Todd “Action” Jackson Smith

Director – Dealer Development

DustyMoto.com

912.576.3101

toddsmith@dustymoto.com

Before we go any further I want to make something very clear.  I am not suggesting we change our accounting format.  The current P&L and Balance Sheet accepted by the industry and CPAs works, and works very well.  My suggestion is we learn how to use BOTH in measuring the success of our business and specifically our parts departments. We know our P&Ls give a accurate picture of how much money we made on the items we sold over a set time frame.  Regardless of how many items we sold, it shows us accumulated sales, cost of goods sold, and profit generated.  So then, if this works so well, why do we feel like we are missing something?  Where is that profit we show on paper?  Is it in the checking account?  In most cases, it is hidden in the chart of accounts as parts inventory.  For example, You sell a 50.00 widget.  You have to special order said widget. For what ever reason, you order 3 of said widget.  You receive the three and bill the one you have sold.  Now, Your P&L tells you that you are rich!

You sold 50.00, COGS is 30.00, Profit is 20.00.

 YES! We made money!!!

But wait, I don’t have any money!?! If we dig deeper we see that our Balance sheet will tell us we now have 60.00 in inventory – those two other widgets we ordered. If our focus is to make money to grow, run, and maintain our business then we should use both reports together. Example:

So in reality this transaction actually cost 40.00 of real money or operating capital.  Now, this is a very basic view of a single transaction and does not factor billing terms and additional sales of this widget.  The point I am making is that by using both reports readily available to us we can monitor profitability very effectively.

I am a true believer in monitoring, inspection, and tracking progress over time.  I am sure your POS system breaks each of your vendors into their own category so you can focus one each line individually.  Try this as an exercise; run your balance sheet for the last three months, specify the end date for the month you are running.  What we are looking for is the trend.  Have the amounts increased or decreased, and have some vendors outperformed others?  If you start factoring in this difference from month to month with your P&L you can get a better picture of your usable cash flow.  If you are adding to your balance sheet, you are subtracting from usable cash flow.  If you are reducing your balance sheet then you are adding to cash flow. 

Next time we will get into this a little deeper and start building some process and procedures to make this part of your management system.  You will also start to see how measuring this one metric will allow some fringe and often overlooked areas to come into focus.  In no time we will be the most efficient apple vendors around!

I am continuing this series over several weeks.  If this is interesting to you and you want to subscribe to the series click here and put in your email address:

This will give you some extra content and view points and will allow you to give your input if you so desire.  As always your email will be held in confidence, we don’t share or sell them.  And just so we are clear, this is FREE, I’m not going to try to up sell you later.  Join in….

Bobby Franklin CEO,

DustyMoto

bobby@dustymoto.com

twitter: @dustymoto

In my opinion, the standard Profit and Loss format in use in our industry is confusing and has some serious short comings in regards to profitability in the parts department. My complaint is that it is too narrow of a view to give you all the data you need to really know how your parts department is performing. Isn’t profit truly defined by the money we make on the money we invest? If that is true, the problem comes with the simple fact that we deal with hundreds, even thousands of individual investments each month. Of course the majority of these investments pay off and are represented in the P&L. Unfortunately, the ones that do not pay off for what ever reason (ordered wrong year, model, part, etc.) are never included in the P&L. These “bad investments” are simply moved to the Balance Sheet as a asset at full value. That would be fine if we were guaranteed to sell it in a timely manner. The nature of DustyMoto has proven that many of these “bad investments” indeed never sell, to the tune of hundreds of thousands of invested dollars being lost to the dreaded “no sale” segment of inventory.

Let’s look at it a little differently: You have 100k you want to invest so you spend it all to buy an apple orchard. No buildings, equipment, no improvements, just trees and land. On your first harvest of the season you make 30k. So, did you make a profit? How do you view it? Of course you can get fancy, you can say you want to make 10% on your investment of 100k, and the rest is profit so you made 20k profit and 10k recapitalization. You can say view it as you are 30k closer to breaking even, only 70k more to go, then you can start making some real money. Regardless of how you look at it, the facts are you had 100k in cash, now you have 30k in cash and an orchard.

Now scenario 2:  Instead of buying the orchard, you buy a truck load of apples from the orchard. You buy 100k apples for 1.00 each and you plan on selling them of 1.50 each making a full .50 profit on each one. The first week you sell half of them at full price and bring in a whopping 75k. So your P&L shows you: SALES 75k, COGS 50k. PROFIT 25k and your Balance sheet shows that you have 50k in inventory still to sell. But you know your inventory has a shelf life and will soon go bad so you take action, you drop your price to your cost of 1.00 and you sell 35k the next week. Your P&L now shows you: SALES 110k, COGS 85k. PROFIT 25k and your Balance sheet shows that you have 15k in inventory still to sell. Now, all you have to do now is sell the remaining 15k of rotten apples you have. Easier said than done, right? Your P&L is telling you that you made 25k in profit, but your bank account is telling you something completely different. Which one is right?

Which of these two scenarios do you think best mirrors your business model for your parts department? Do you look at your inventory as a true asset or do you view it like our apples with a certain shelf life? If you are a large Internet parts operator you most likely view your parts as a true asset, where as a dealer serving only their local market may hold to the shelf life principle.

I am going to do a series around the second view of your inventory having a shelf life. If this is interesting to you and you want to subscribe to the series, simply enter your email address and click the button:

This will give you some extra content and view points and will allow you to give your input if you so desire. As always your email will be held in confidence, we don’t share or sell them. And just so we are clear, this is FREE, I’m not going to try to up sell you later. Join in….it is going to be an interesting journey!

Bobby Franklin CEO,

DustyMoto

bobby@dustymoto.com

twitter: @dustymoto

Now that you have had a little time to regain faith in your self, its time to start building some excitement. Get the juices flowing and set the tone for your coworkers around you. Make a statement that you BELIEVE in your self, your job, and your department. We all feed off of each other and subconsciously mirror our environment. So YOU be the positive influence for those that work in your department.

VERBALLY REINFORCE YOUR VIEW AND OUTLOOK.

Bring up positive points to your team often. Statements like “I am so glad this Christmas season is much better than last year!” can either boost them up give you the change to explain what you mean. If they have noticed traffic is up before you then they feel as though they are very observant. You can reinforce the fact that your business has become leaner and more efficient so profitability is at a lower mark now.

VISUALLY REINFORCE YOUR VIEW AND OUTLOOK.

Actions speak louder than words so get some activity going. Rearrange, straighten up, clean, reload shelves, and anything else you can think of. Just be doing something all the while talking up the reason behind your outlook. Rearrange so the regulars will see a change. Clean so the new customers will have a good first impression. Reload shelves so they will both be impressed at your offerings. Be busy so your team can see YOU believe in what you say.

CREATE THE ATMOSPHERE.

Put up some balloons in the showroom and out side the dealership. Make sure the music is upbeat and positive. Break out the grill on Saturday and grill some hot dogs. Invite your regulars to stop by just to have extra bodies roaming around. Activity breeds activity so think about the things you used to do when you had the budget. Pick the inexpensive ones and start doing them again. Above all, avoid doing nothing. I have been some dealership that have a atmosphere like a funeral home. Get moving, get going, go in circles if you must, but GO!

FAKE IT ‘TIL YOU MAKE IT.

If you are still getting used to your “new skin” of positive thinking don’t worry. It may take some time to break old habits for you and your team. Make your plans, put them in action, and keep reinforcing it to your self and your team. Remember this: If you act like you WANT to feel, you will start feeling like you’re acting!

More to come on this…. I would love to hear your thought and ideas…

Bobby Franklin, CEO, DustyMoto
bobby@dustymoto.com

912.576.3101