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Capital Idea: Pieces of Equipment are a Big Piece of the Puzzle

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Capital Idea

Pieces of Equipment are a Big Piece of the Puzzle

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To the layman, the only two things needed to open a tire dealership are tires and customers.

Too bad that’s not even the majority of the equation. A lot more goes into being successful. Things like quality service, quality technicians, advertising.

And let’s not forget equipment.

Capital equipment is a very important – and often under-appreciated – aspect of a dealer’s business. Tire changers, balancers, lifts and other hardware all bring money in the door.

Granted, customers probably don’t come through the door simply because you own a certain brand of tire/wheel balancer. But if your technicians know how to make that balancer really sing, that’s exactly what your customers are doing.

Capital equipment can be a hazy area. The costs, payment plans, training and technology advancements – all these things could frighten a dealer right out of making a necessary equipment acquisition.

However, the added benefits afforded by today’s equipment – primarily profits – can be astounding.

"Tire dealers must inform their customers about the advantages of doing business with dealers equipped with modern tire changers and wheel balancers, and that they are trained to better service their needs," said Tom Cole of McCourt Industries.

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First things first, however. Capital equipment is a capital investment. And before an investment can pay dividends, it has to be made.

The Constant Struggle
Here’s an age-old question: "Do I buy or lease?" Everyone has an opinion in this argument, and there are certainly advantages to either means of acquiring needed equipment.

One problem with the debate is every equipment manufacturer has a different opinion on which way dealers should go, from "buy" to "lease" to "do what’s best for you." Sometimes the help isn’t all that helpful.

We suggest you follow the advice of your accountant, who is probably in the best position to steer you through the various cash flow, payment schedule and tax issues involved.

Marcus Petrella, national sales manger for Accu Industries, concurs. "I strongly suggest the dealer consult their accountant because everyone’s business is different.

"But my personal opinion on equipment is that it makes the shop money, it doesn’t cost them money. If you make purchases wisely, they will raise the amount of revenue coming into your shop. I don’t look at it as cost. I look at it as benefit," he said.

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That’s probably a good attitude for the dealer to have. After all, you can’t sell tires without having a supply of them. And you can’t sell tires if you have no way to get the vehicle in the air, and mount and balance the tires.

"The most profitable way we find for a dealer to own a piece of capital equipment is to take advantage of leasing plans," said McCourt’s Cole. "The economic difference between leasing and buying, of course, depends on the lease company’s plan.

The main reasons companies lease expensive equipment is that leasing allows them to take advantage of certain tax breaks, Cole noted, "and it frees up cash flow for other purposes."

As one capital equipment manufacturer said, whichever way you decide to go – buy or lease – never be afraid to ask for a deal. "We’ll go to 30/60/90 days with no interest in a heartbeat, especially when the customer is buying a lot of equipment," the manufacturer said. "If I were the dealer, I’d at least ask for better terms. In many cases, I think you’ll get them."

Keep the Cash?
 As Cole noted, one big business owners choose leasing is that it allows them to keep extra cash in the bank for unexpected occurrences. While you may save money in the long run by purchasing the equipment and avoiding high interest payments, the bank account ends up drained for a time. And who knows what could happen?

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"It’s best to consult with your accountant before deciding which financing method is best for you," said Carl Boyer, vice president of sales for Bee Line. "But leasing is very competitive right now, and should be considered as a viable option for many businesses. In most cases, it’s wise to forego paying cash or using up your credit line to finance large purchases.

"You have an option to buy or lease capital equipment, you don’t have an option on how to pay for unexpected building repairs or business downturns. These ‘investments’ usually require large sums of cash, which won’t be available if you’ve exhausted your cash reserves or available credit line by purchasing capital equipment that could have been leased."

Lease Technology to Stay Ahead
 
Sometimes the question of buy or lease can come down to a matter of how quickly the piece of equipment will become obsolete. The last thing a dealer wants to do is purchase equipment and then all of a sudden find out it’s last season’s model.

Just as with personal computers and video camcorders, capital equipment "technologies will always improve," said Jeff Hastings, president of Pro Cut International. "We’re in the process of doing a deal with one company that would give them an ‘operating lease’ versus the traditional capital lease. They’re concerned about technology and don’t want to buy something that’s going to be obsolete in four years when they’re finished paying it off.

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"So in three years, we’ll give them the next newest thing," Hastings said. "What the company is saying is that technology is changing too fast and they don’t want to take big capital hit just to keep up. And from the manufacturers’ prospective, I get a partner in the deal."

Consider the Whole Picture
When working to acquire a piece of capital equipment, try not to look at it with an "me vs. them" mentality. Try to keep the prospective Hastings has: you’re getting a partner because the manufacturer doesn’t want to see you fail. It’s in the manufacturer’s best interest to help all they can. If you’re getting your profits, he’s getting his. So don’t be afraid to look to the manufacturer.

"The manufacturer might be able to find a lease company that could be more friendly to the end-users needs," said Cole. "And there are always special programs that are offered."

Programs seem to be the way to go for the dealer making the purchase. "Periodically, we offer programs," said John Rylee, of Rotary Lifts. "And we also have arrangements with companies to help the buyer make the decision easier."

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But even before a sale is agreed upon there are things the manufacturer can do to help – while winning business at the same time. Sometimes a dealer can get lost in the money and not see the profits for the bill, so to speak. Listen to the sales rep.

"More time needs to be spent considering the total opportunity adding a new piece of equipment to your business really represents," said Bee Line’s Boyer. "For example, when deciding whether or not to add an alignment system, many shop owners consider only the added costs and baseline revenue associated with the alignment system itself. They don’t take into account the added revenue from additional services such as axle correction, added parts sales and increased customer satisfaction.

"A good field rep should be able to give the shop owner a realistic expectation of how much additional revenue he should expect by adding a given service to his shop. These factors should be taken into account prior to purchasing a new piece of equipment," said Boyer.

And even after the equipment is picked out, financed and installed, don’t be afraid to go back to the manufacturer for some additional help. After all, the equipment might be in your shop, but it carries their name on it.

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"Ask you rep to sponsor an open house or promotion focusing on the new piece of equipment you’ve purchased," Boyer said. "Offer half-price alignments for a day for two, and use the rep to support you in assisting your staff."

New or Improved
 Let’s face it, nothing can be "new and improved" at the same time. Still, in this age of technology, change comes rapidly. Some change is for the better, and sometimes it’s not so good. But a dealer must keep an eye out for anything new and exciting coming down the road that could vastly improve the bottom line.

Some of the new products that have come on the market recently are:

  • Universal Scissors Lift-6000 from Mohawk Lifts. The full-rise no-post, portable lift was designed to take up no more space than a small car, while capable of lifting 6,000 pounds and providing six feet of lifting height.
  • Hunter Engineering’s GSP 9700 wheel balancer allows dealers to road test the wheel before it’s put back on the vehicle to eliminate vibration problems. The machine utilizes a "road roller" to measure uniformity of the wheel and tire, simulating road force and making sure the assembly is round. If a flaw is detected, the system provides instructions on how to solve the problem.
  • The Coats Model 9010E and 70 Series tire changers from Hennessy Industries were made to handle low-profile and run-flat tires. Performance tires continue to become more prevalent in the marketplace, forcing dealers to be equipped or lose profits. Both machines deliver ease of use and protection of rims.
  • Accu-turn’s Model 2200 four wheel alignment system handles both two- and four-wheel alignments for cars, light trucks, SUVs and vans – including German-made front-wheel drive vehicles. The system uses Mitchell Under-Car software and allows for precise viewing of critical measurements such as caster.

Newest Technology
Every company has a few bits and pieces of new technology up its sleeve. But sometimes, unveiling any new improvements is dictated by what the market wants and needs. There might come a time for certain plans to be scrapped and others to be tweaked. Many companies just have to wait and see.

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"There are always a lot of things on the drawing board," Petrella said. "I can’t say at this time what’s going to become industry standard. The market will dictate that.

"As an example, there’s a lot of run-flat tires on the market but there’s also the PAX System that could combine them all. It could be the wave of the future or it could end up being like Beta video tapes."

Rotary’s Rylee agrees. "We’re always making enhancements to an existing product line. What we’re trying to do is stay closely attuned to the customer. We’re focused on the end-user as the one that determines the value of the brand."

One thing is for sure, with new ideas hitting the market, dealers and their technicians are going to need training. You can’t just read a simple instruction manual anymore and expect to know everything.

"Due to the high-end technology that’s connected with the tire and wheel industry, it’s no longer okay or cool to grab a bigger hammer and beat the tire off the wheel," said McCourt’s Cole. "Some wheels are very expensive, and the customer won’t stand for damaged wheels. Continuous training is necessary for the installer to keep abreast of new methods."

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New technologies or training aside, the end result still remains the same: make money. High profits are the driving force behind everything in today’s market. And don’t think that fact is lost on the equipment manufacturers.

"In the end, this piece of equipment has to make the dealers money, either through added efficiency or by making an expense job easier and more foolproof," said Hastings.

SAFETY REMINDER: THINK "R.I.M."


Tire changing can be a dangerous business. But one simple, familiar word can help keep everyone in your shop safe. It’s called "R.I.M." 

R.I.M. stands for read, inspect, and mount, and it’s the basis for a safety training program from Hennessy Industries, makers of Coats, AMMCO, and Bada products. The R.I.M. program has been used by key tire shops all over the country.

The idea behind R.I.M. is to give technicians a "reflex" way to remember basic safety procedures. "A catastrophic accident like a tire explosion can have devastating consequences," said Bob Erickson, manager of program distribution. "But by following the three simple steps of the R.I.M. program, it’s possible to keep yourself safe in case an explosion does occur."

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Here are the three steps of the R.I.M program:

  • Read the tire size on a new tire before mounting to make sure it is the proper size for the wheel.
  • Inspect the wheel for cracks, rust, and or other damage that could cause an unsafe situation.
  • Mount the tire safely, making sure not to put any part of your body over the tire during inflation. This is a critical step, since inflation is when many accidents occur.

A full-color poster that details the basics of the R.I.M. program is available free from any Coats distributor, or directly from Hennessy Industries. The poster explains the key steps of R.I.M., and shows dangerous situations (like mismatched tires and wheels) that can lead to accidents.

The full R.I.M program features training videos hosted by Dave Bowman, star of TV’s "Shadetree Mechanic," brochures, posters, and other materials, and is available from Coats distributors nationwide. Key portions of the program are also available online at www.hennessy-ind.com.

To learn more contact your Coats distributor or call Hennessy Industries at 800-688-6496.
Courtesy of Hennessy.

Service With Vs. Without An Automotive Lift

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Service

With

Without

Time Saved

Oil Change & Lube

15 Min.

30 Min.

15 min.

Replace Muffler

35 Min.

65 Min.

30 Min.

Replace Front Brakes

60 Min.

110 Min.

50 Min.

Replace Transmission

120 Min.

210 Min.

90 Min.

Replace 4 Tires

45 Min.

90 Min.

45 Min.

Replace Starter

30 Min.

60 Min.

30 Min.

Replace Fuel Pump

60 Min.

120 Min.

60 Min.

Replace Alternator

35 Min.

45 Min.

10 Min.

Information provided by Rotary Lift

BEFORE MAKING THE PURCHASE…
When considering new equipment, it’s also important to consider the intangibles of the sale.

  • Buy what you need to get the job done. Don’t get caught up in the emotional aspect of the sale. Do you really need the built-in coffee maker and shower option? Ask for your technicians’ input. If you purchase the unit with the built-in coffee maker and shower option, will they use it? Generally not.
  • Ask for references from others who have purchased a system similar to yours.
  • How long has the sales rep been with the company? Do you feel confident he’ll be there tomorrow, after the sale is made?
  • Be cautious of "trendy" equipment or products that seem "too good to be true." They often are.

Provided by Bee Line.

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