BETTER BUSINESS & SALES
BY PHIL SASSO
CONTRIBUTING EDITOR
Phil Sasso is president of Sasso
Marketing Inc. (sassomarketing.
com), a technical marketing
agency specializing in tools
and equipment. Subscribe
to his free marketing tips at
philsasso.com/blog
Go online
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To learn how to carve
out specific areas
on the truck where
customers will find easyto
puchase items, visit
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21028140.
Stock right, sell more
Keep your inventory full, fresh and bankable
Technicians come to you to buy stuff, not to
order stuff. So you need to keep a solid inventory
on your truck.
When a customer asks you for a tool, they want
to take it to their work bay and put it to work ... today.
With a few exceptions, they don’t want to wait. If
they were willing to wait, they might order it online.
And you don’t want that.
If you don’t stock it, you can’t sell it. But you can’t
stock everything. That’s the delicate balancing act of
being a tool dealer: you need full inventory, yet you
need to know what to stock and what to special order.
“When you’re first starting out you have a good
tendency to want to buy and stock everything,” says
12-year Cornwell dealer Andrew Phelps of Westminster,
Maryland. “You get tired of telling customers
you need to order it. It wears on you. But you can
bury yourself real quick trying to overbuy inventory
and end up putting yourself out of business.”
Overstocked beats under-stocked
I polled a dozen tool dealers on inventory. Half
had 10 or more years of experience, half had been
a dealer less than a decade. Two-thirds of veteran
dealers said they were overstocked. But none of the
dealers with 10 years or less experience were overstocked.
Although it seems counterintuitive, perhaps
the more seasoned dealers had learned that
overstocked is better than understocked, and had
accumulated the financial resources to carry higher
levels of inventory.
But just having a lot of product on your truck
or stored in your garage is not a guarantee of success.
In fact, tying up too much cash is not a good
idea. Smart buying is more important. Successful
dealers seemed to be the ones that stock up on deals
at annual tool expos, buy on special or buy in bulk
so they can maximize their margins. The math is
simple: Lower costs equal higher profits.
To everything turn, turn
Inventory turn is a key measurement in retailing.
It measures how effectively you are using your
assets. To calculate inventory turn, divide annual
sales by average inventory. There is no hard and
fast rule in tool distribution on what a turn should
be. But in theory, one turn is too low. And six turns
26 Professional Distributor I December 2018 I VehicleServicePros.com
is excellent.
About half of the dealers I polled did four or
more turns a year. Lower turns concern me, but not
as much as those that had no idea what their turn
was. That’s scary. If you don’t know your numbers
off the top of your head, you don’t have a pulse on
your business.
Cornwell dealer Phelps is successful at doing
about five turns a year. I give him a gold star for
using his assets well to make money. He is textbook.
The other aspect of inventory is keeping most
of your inventory on the truck and not in storage.
Having too many items in storage is tying up inventory
and cash.
“I really don’t have anything at the house if there
isn’t one on the truck,” Phelps says.
He clarifies that there are big items that he
doesn’t carry on the truck like welders and toolboxes.
But he tries to keep at least one item from
the product category on his truck. He has about 75
percent of his inventory on his truck and the rest
at home.
Margin matters
One of the keys to success is not just turning your
inventory, but maintaining a strong margin on the
items you sell. A good way to do that is to shop for
deals and stock up when items are on special.
Phelps says he spends about 25 percent of his
annual budget at the Cornwell Tools Rally. “I don’t
have a problem sitting on it all year to make the
extra margin on it.”
Some stuff from the rally he promotes as soon
as he gets back to work. He also tries to buy extra
items to inventory so he can increase his margins
on day-to-day orders, too. But spending so much
money at one time can be stressful.
“Even after 12 years in the business, when I look
at my account and see an $85,000 tool bill after
rally there’s a little antacid involved,” Phelps says.
You can’t have it all
You can’t carry everything on your truck. There isn’t
the room or the cash to do that. So, there’s a balance
between what you stock and what you special order.
Using his previous year’s sales report from Cornwell’s
software, Phelps says he “spits out the top
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