Today’s trivia question: When it comes to margin management, how high up the executive tree does this conversation go when deviating from the original marching orders? Does it start from the very top, or is there a direct line through sales/service managers, COO, vice president of sales, etc.?
There is no right or wrong answer, obviously. The management aspect is the most important part, and we canvassed our State of the Industry dealer panel to get their views on how pricing is handled.
“It’s definitely a top-down situation for us,” noted Susie Woodhull, CEO of Woodhull LLC in Springboro, Ohio. “We manage to the mils. We’ll take advantage of any cash with order opportunity, take advantage of warranties. Once a year, we renegotiate contracts with UPS, our phone carrier—we look at everything. If you’re trying to squeeze as much margin out of your business as you can, I don’t think you can leave it to other people.”
Woodhull adds that the dealership relies on a series of creative bonuses for the management team that is tracked closely. The company has annual goals on service revenue per tech, overall company revenue per employee, days sales outstanding, percent of receivables over 90 days, etc. Bonus opportunities for the management team on their base salary is obviously a tremendous motivating factor.
“When managers see those kinds of numbers, they’re motivated to go for the goals and try to stay within them, because each of the goals is usually worth anywhere from a half a point to a full point on their base salary,” she said.
Having skin in the game from a middle management perspective helps ensure margin dollars find their proper place in the dealer’s coffers. “Management has to be compensated on a percentage of gross profit,” observed Chip Miceli, president and CEO of Pulse Technology. “The corner office does get its hands dirty to be certain that the business is viable.”
Setting Price
According to Melissa Confalone, vice president of sales for Fraser Advanced Information Systems in West Reading, Pennsylvania, account executives and managers are provided pricing for both hardware and aftermarket supplies. Any deviation from that pricing must be approved by sales and service management.
“If the margin goes below specified levels, approval from the chief operations officer and the vice president of sales are required,” she added.
Being in lockstep ensures no reps “go rogue” in an attempt to win business that is ultimately not a victory for the dealership. “Our ownership and sales leadership collaborate on a regular basis for the best interest of all involved,” notes Brad Yocum, market director for Function4 in Sugar Land, Texas. “We are very fortunate.”
Off the Record
Every now and then, we get input from a dealer who would rather not go on the record due to competitive considerations/OEM relationships. Here are the thoughts on margin protection strategies from one prominent dealer who spoke on the condition of anonymity.
“Some dealers are taking this opportunity to upgrade their base early, before significant price shopping takes place due to a top-down push to reduce all contracted expenses,” the dealer wrote.
“Some are using very low meter, off-lease equipment to save their customers significant amounts on their copier leases, (thus) stopping the need to shop. By offering these solutions, some dealers can maintain good margins while saving their customers money at a time when monthly spend reduction is in the air and employees’ jobs may depend on this.”
The dealer continued, “And some dealers are building their own flat-rate programs that maintain pre-pandemic page volumes, allowing their customers to print as much as they want, similar to the Konica Minolta One Rate plan. This enables dealers to have a stream of known page volume income no matter what else happens in the economy, and keeps the competitors at bay.”
