T-Base Group we offer a wide range of risk management solutions for equipment dealers and we've been with almost 40 years of experience in the equipment industry. Our primary product is REP or Rental Equipment Protection. It is a waiver for equipment dealers, I'm sorry, a damage waiver for equipment dealers that improves profitability and builds relationships with your rental customers. I come from a rental dealer that uses REP. It was a great tool and made taking care of your customers very easy and painless. We also provide a certificate tracking through Straight Docs. Straight Docs is a proprietary program that handles each certificate of insurance individually and contacts the insurance companies on behalf of the dealers. We also provide program management and consulting services to make your whole business insurance program work harder for you. For more information please visit JTBaseGroup.com or you can contact me directly at Nick at JTBaseGroup.com. I'd now like to introduce, I'm now pleased to introduce our next speaker, Dick Stewart. Dick has held a variety of management and advisory roles throughout his career as both CEO and COO at Grant Thompson. Dick interacted with dozens of enterprises including independent equipment dealers. That experience has fed to his interests into why some companies do well and some do not, even those in the same industry. That interest brought him to the University of Denver and in turn AED where he's completed research into emerging trends in dealer strategies and business models. He has now completed research into common practices and currently utilized by dealers in their rental strategies, business models, and operation and their correlation to rental profitability. He's with us today to share the findings from that research. Please welcome Dick Stewart. Thanks Nick and good morning everybody. Again this is Dick Stewart and I've probably crossed paths with some of you. I'm happy to join you at least virtually today and thanks to the AED for tolerating my more or less unrelenting interest in dealerships. What brings us together today is the role of a leader to work on the dealership not just in the dealership. Your interest in attending the conference today demonstrates you recognize that difference in looking to expand your skills. My approach to this today will be to talk about leadership and specifically leading change but content specific as it relates to rentals from the data that was collected and is somewhat analyzed at this point anyway from the AED's first-ever annual rental report. We will talk about the source of that rental report and comments about its availability as we go through the presentation. I'm looking for you to walk away with two things today. First is a rational process for leading change and as I understand the speaker that preceded me he commented a lot about pivoting. My terminology for that will be leading change so that will be the first takeaway as a framework to achieve that and secondly will be a large amount of content for you to benchmark your dealership against with regards to the performance of rentals. So the agenda to capture all this has four components to it. I'll comment on these but as we go through each of the four components we will entertain questions. My preference anyway I hope it's yours is to relate the questions to the section that we just covered. So we'll set context initially. I want to talk about the research project that was a year in the making. Then we'll talk about some principles for leading change and then comment specifically about rentals and taking a strategic view to what's happening with dealers at this point and comment a bit about leadership and culture. Then we'll move on to successful practices. I'll define that later. Then we'll move on to best practices and then hopefully I've made some sense and we can hang things together as we go forward. So enough with the promises let's get started with the context of why we're together at this point. Last fall Brian McGuire and Jason Blake approached me. I provide support to the AED. I am not in the consulting business but they asked me to help them do research to find ways not just to help dealers measure the performance of their rental operations but to improve the performance of their rental operations. We launched a project as follows. We decided to examine successful practices amongst dealers for their strategy elections, for their business model elections, and how they operate rental operations. That was accomplished by doing on-site interviews that began really last September. There were 10 dealerships that were examined. They were hand-picked volunteers. They represent rent to rent as well as rent to sell businesses and include all AED revenue strata that you see in the cost of doing business report. The on-site reviews were generally three days with a no holds barred approach to getting the data and the documentation as to how they take a look at this. That composite then led to this report that was issued just last week and it's being called the companion to the annual cost of doing business report. It contains data from a survey that addresses the prevalence of the successful practices and also provides detailed rental operating metrics more granular than you have ever seen before in the cost of doing business report. Within this report there were 91 respondents which is a actually very healthy sample of the overall membership of the AED. Those 91 provided predefined P&Ls and balance sheets and by predefined I mean we were crafted essentially the chart of accounts for them to populate and secondly they responded to a qualitative survey that was drawn and crafted and based on the successful practices that came from the 10 on-site interviews. So the way to look at this is the companion report is a reflection of operating data for all revenue strata from 91 respondents in their qualitative responses to the practices that were defined through the phase one examination. There is a third phase to this that we'll talk about enabling technology because as you well know probably better than I do rentals are really a technology driven side of the business. It is a game of inches not a game of touchdowns. That aspect phase three will likely happen at 2021 and will facilitate kind of a bake-off with two or three of the technology providers. Our focus today is on phase one and phase two. So some principles around leadership. For those of you in the audience you know if you're in an existing leadership role or in pursuit of one or have aspirations to be you know I want to present what is a very important principle at least to me let's call it principle number one which is the key role of a leader and it's to grow the business make no mistake about it you know Darwin says it more eloquently than I do but it is adapt or die or pivot or die but a smoother way to say it is that adaptation equals change. I don't care if it's the pandemic or the Great Recession or political policy or your OEM or your competitors or your employees they all demand change and when you bring that change into the necessity to grow the practice I'm asking you to get your head around the idea that every moment of every day the challenge becomes what do I do to grow my business and how do I need to adapt or change the dealership so I can enable that and remain relevant in the marketplace. So essentially job one for a leader this is my definition job one for a leader is to understand reality what's going on in the marketplace what's going on with my competitors and lead adaptation of your organization and its people to retain your position in the marketplace. Now leading change I'm not smart enough to cook this up by myself there are four or five frameworks out there for change management for you know gaining the hearts and minds and souls of people the best I have run across is a book called leading change I'll flash up a source for that in just a second it's a highly utilized text in graduate schools and has a seven step process that on the surface is very simple it's actually very elegant. The first step is to create a sense of urgency as I have learned change occurs when two conditions exist first there is a compelling vision and secondly there is an urgency to change other words the existing situation is damn near unbearable. Those two things combined are you know they're really the launching point to initiate change. The second step is to recruit a winning team get the right people engaged that will execute the change and are committed to making it happen. Then and only then develop a compelling vision with that team and based in the compelling or in the the sense of urgency. Finally and this is based on my experience this is where great ideas great visions and great strategies fall apart is a disconnect with how things happen on a daily basis in the dealership. Everything from answering the phone to presenting a machine in the yard everything in between needs to be reflective of the vision and the strategy oftentimes that doesn't happen. The fifth step is to empower teams and enable them to move on key success factors. The sixth step is to demonstrate wins and focusing the efforts of this team that you've created to go out and get those wins and the seventh step is to anchor the change culturally so that it becomes again just an institutional way of doing business. Now the book Leading Change by Cotter is the one that as you aspire to be better at being leaders or becoming leaders it's almost mandated reading I'm sure you can get it for books on tape but these seven components represent a framework. Now as we go through the rest of the presentation I am going to talk about the annual rental report but then overlay the content from that rental report with each of these seven pieces of framework for what I would call as leadership opportunities around rentals. I know most of you are in the rental business today you have some form of rental rent to sell or rent to rent. For those of you that don't you know it's it's I'm gonna try to make a case it's time to get on board with that maybe more than you anticipate. So as the content demonstrates what it means to be in rentals we will talk about the leadership opportunities which is the theme of course of this conference. The leadership opportunities for you to exercise within your dealerships. So let's talk about a strategic view in rentals. This is a graphing of revenue mix for dealerships reporting in the AED annual cost of doing business report. So you know each year there's a hundred plus. It's never the same group so what we have is a very substantial sample of what has occurred over the last eight years in terms of revenue mix. Why this is important revenue mix is maybe the best indicator at least retrospectively what strategies are playing out in the marketplace. So if you look at the mix between whole goods, rentals, parts and service the trend lines the dotted lines which are linear lines demonstrate the shift that has occurred in the marketplace over eight years from whole goods to rentals. And I need to move that there. Yeah rentals excuse me whole goods are down nine percentage points in terms of contribution to overall revenue. Rentals are up ten points. So that's you know that's what you would call a compelling story about what is happening in the marketplace. This chart also represents a benchmarking opportunity for those of you as you go into your 2021 planning process to benchmark your operations. Now within the cost of doing business report you can get this data sliced and diced every way possible. It's done by revenue strata, it's done by horsepower and it's done by geographic region seasons. This is a composite of all dealers. I did not venture into slicing this up for you we just don't have enough time. Now to illustrate the idea of leadership opportunity this is a place to create a sense of urgency. If you're ahead of the curve on this with your dealership and you're comfortable with this shift that is occurring in the marketplace you have adapted or are adapting to this reality way to go. You know you deserve you deserve to be patted on the back. If you find yourself behind the curve on this there is a sense of urgency to get in the game to remain relevant. I would urge you to get a hold of the cost of doing business report to look at the the revenue strata where your dealership lives. It's useful for that. It's also useful if you're growing and you're about to break into a new revenue strata. It's almost predictive of the new game that you may be stepping into. So again we'll go through this this presentation talking about content but we'll also talk about the leadership opportunities. Another cut on this if this figure trend is the shift that's occurring within rentals itself. This one surprised me when I worked it up. The growth in rent to rent has increased four points in terms of its contribution to overall revenue. Excuse me rent to sell has increased four points. Rent to rent has increased seven points during that time period. Now there has been a leveling the last four years. We need to acknowledge that but the trajectory of the growth is more substantive for rent to rent than it is rent to sell. And again it's potentially I'm not trying to spoon-feed this but potentially this is an opportunity for a leader in a dealership to create a sense of urgency around the fundamental question. Are we competitive and what do we need to do strategically to be competitive? A third cut on this is to look at gross margins. New equipment and again this is a composite it's not broken out by revenue strata or horsepower. And there's a very compelling story here about where money is being made. You know I'm not an original thinker at all in the idea that new equipment is being pushed out the door at skinnier and skinnier margins with the hopes of making it up someplace else. Well that someplace else is of course parts and service. Increasingly it's rent to sell and especially it's rent to rent. These are experienced margins for the year 2019 so very relevant current information. Another sense of urgency and a benchmarking opportunity. Now I want to take a little bit of a right turn and talk about culture. You know for for me leadership consists of two components physics and chemistry. Physics are the things that a leader does. The things that a leader does. Trying to drive a particular set of margins or trying to steer revenue sources to particular lines of business. The chemistry aspect of leadership is how you do it. How you interact with people, how you engage people to want to sign on and how they feel about what they're doing. You know I won't make any political comments but I think you get the idea what I'm talking about. You know think Taco Bell versus Chick-fil-A or think Home Depot versus Ace Hardware. There are different cultures in that organizations that affect the way the people treat their customers and there's a direct correlation to the effect that has on revenue. In the 1980s long time ago it was a big time period for business research. One of the research papers that came out is a document called the competing values framework. It was done at the University of Michigan and it identified four fundamental cultures that exist in organizations. I'm going to promote this this knowledge this wisdom about cultures as a requirement for leaders to be aware of so they can adapt their organization and in this case they can adapt their rental line of business to the culture that's necessary to win in the market. A few more comments about that in a moment. The first the first culture item is defined as a market. It's principally defined by competitiveness. Here are the leadership types that demonstrate that the values within that culture and the theory of effectiveness. The second is clan which is a very collaborative almost an academic approach to getting business done. The third is hierarchy. Another word would be a bureaucratic approach to getting business done and the fourth is a fancy word adhocracy which really means innovation. For your dealership I'm not even going to venture a guess on where you may have your line of business today for rentals where your dealership may be. The real question is within your geographic region what do your customers expect to have them want to do business with you and continue doing business with you. Your job as a leader then is to bring that reality inside your organization and adapt the culture that the market adapt to the culture that the market is expecting. The premise here is that culture is not something that happens to you. It's actually something that a dealer can build and mold. It's further defined by the idea of individual individuality, flexibility, or stability of control, an external focus, or an internal focus. The next slide is going to provide a few more examples on this. I do want to point out that this is a leadership opportunity to create or to recruit a winning team. It would be sub-optimized to say it mildly. If you make a determination that the marketplace is highly competitive, that your customers expect you know just superior support, superior delivery, and Johnny on the spot with whatever you need at whatever moment. That's characteristic of a market-driven culture. It would be a disaster to have a very clannish hierarchy approach to address that need in the marketplace. So I'm sure you're picking up the broad application of this thing. If we look at another piece of research that was done in the 80s, this one's pretty popular. It's very well known. It's the five stages of a business. And what I've attempted to do is to marry together the culture types that relate to each one of the stages. So let me go through this and see if it makes any sense to you. The first stage of a business is development. So if you're just beginning a rentals line of business, your focus should be on creativity. The focus of the leader should be on creativity. And it requires an innovative culture backed up by an innovator running it. Pretty obvious, huh? The next phase is the startup phase, which requires a bit more direction from the leader. And it would take a market-driven individual, hard driver, to put a stamp in the marketplace. The third phase is growth. And it's a blend at that point between the market-driven person and creating leverage, getting things done through other people. The fourth stage is expansion. That requires essentially more of the same, but begins to bleed in more process to get things done. And at the maturity stage, I mean, you've got a very mature decades old kind of business, you'll find them being run largely this way. My general impression based on doing the interviews at those 10 dealers is rentals largely live in the startup and growth phase. So as a leader, again, choosing the right team and adapting the culture, molding the culture to what the market is demanding is really a threshold requirement. We'll talk towards the end of the presentation of how to make that determination where your dealership lives. It's actually a very elegant thing to do. So let me pause there and take a breath, get a drink of water. Are there any questions? I think, Sean, you're going to read any questions that may come in through the Zoom chat. Are there any? So far, it looks like we're good, Dick. There's no questions as of right now. Oh, man, that's bad news. Maybe we'll get more traction on the next one. So let's take a look at the successful practices. Those are the practices that were derived from almost 30 days of examining dealers to get down to documenting everything from how they make decisions to process flow. And this is chunked up into dealer strategy, business model elections, and operations. A lot of content here. So strategy for rentals are, this would be the first successful practice. They are intentional and an integral component of the overall strategy for the dealership in the marketplace. In other words, rentals becomes a strategic asset of the dealership, not an operating requirement. You have to be there, not because you want to be. So you'll find this true in dealerships that are very customer-centric and solutions-based. Rentals are on an even footing with all customer offerings. And what that means is funding the resources. Strategy at its core is actually a process of allocating resources. Monetary resources, human resources, mindshare. And rentals gets its fair share of what's available each year so it can conform to expectations in the marketplace. And they're mostly growth strategies. There's no protectionism in the strategy. There's no hold and maintain in the strategies that I was able to review. They are growth oriented to go out and grab money, grab revenue, and make money at it. Let's see. I keep punching the wrong buttons. Yeah. So this is an opportunity for a leader to develop a compelling vision and strategy for rentals. I'm not going to suggest what that strategy ought to be. I mean, I got 10 wonderful examples. They're tailored to your equipment. They're tailored to your customers. They're tailored to your geography. And they are informed by your competitors. But the point is being intentional about those data points to pick a spot in the marketplace where you can build a moat and where you can be strategic in the execution of your rental business is key. This is the first successful practice that I want you to contemplate. The second is business models. So we'll move out of strategy now and into how you make the strategy come to life. And what we discovered through these reviews are there are really three business models to no one's surprise I'm sure. The first is the rent to sell model. Second is the rent to rent. And the third is a hybrid. They each have their own characteristics. I'll give you some highlights here. I understand the PowerPoint may be distributed later. You know, the primary objective of rent to sell is to sell. It is a paid demo. Although profitability on rent to sell is a little bit higher than selling a item of whole goods outright, the margin on rent to sell is largely bound by what the margins are for whole goods. The reason for that is if you have a customer who says, okay, I'll take this machine for three months if you'll credit half the rent against the purchase price later on. The customer really doesn't want to overpay for the machine. So there is some limitation to the profitability that can come out of rent to sell. The distinction about rent to rent, and this is, I don't know, this is conceptually different. This is something I really learned when I did these interviews. The primary objective is return on investment. It's not sale of the equipment. Of course you will exit the equipment after three years. But the primary objective is a return on investment and that asset, that item and inventory is priced as a return on a financial asset. It's not priced as a margin on a whole good. There's a very big distinction there and I've tried to describe that as a life cycle ROI consisting of sales like margins, plus the cost of capital over that three or four years, plus a return for risk over that three or four years. And it begins to look like a financial asset rather than an inventory item. The hybrids, based on the the reviews that I did and the experience I got and looking at those things, the hybrids are evergreen kind of rent to sell equipment that are difficult to get out of. Dealers are bleeding down their their book basis in the equipment so they can get out of it and not book a loss on the sale. That's fundamentally where this comes through. The investment requirements for each one of these, incrementally expensive for rent to sell, very expensive for rent to rent. That's why you don't find a whole lot of people in it. For rent to sell, the hybrid, again it's similar in the nature to rent to sell except the assets, you're not out of them in 90 or 120 days. You're out of them in two or three years but you'll sell it at a moment's notice. A key distinction about rent to rent, that stuff's not for sale. It's a financial asset that's going to provide a return over three years. This again is an opportunity for a leader to integrate the vision and strategy for rentals into operations and that vision and that strategy should be very intentional about the nature of the business that you'll be in with rentals, if not all three. Let's take a look at business model key success factors. I won't go through these in detail to save some time but I think they're worth reading because it would inform your business model and it would inform the nature of the person you want leading this. One of the key things here is the rent to sell is a transaction business. We're looking to execute a transaction to sell that piece of equipment. For a rent to rent piece of equipment, it is a process business. We're going to rent it over and over and over and over. That affects what the piece of equipment looks like, how it's priced, purchase options that are available or not available as may be relevant. Utilization, of course, is key in rent to sell. It is the name of the game in rent to rent for sure. These distinctions are a way to bleed in and allow teams to focus on and execute the key success factors. Essentially, these become somewhat of a job description for the manager or leader of the respective lines of business. I want to talk about management roles for outbound and inbound processes. Let me make a distinction upfront here. Role does not mean a person. You can have one person executing each of these three roles. They can be combined into one person. Where you find all three of these existing, of course, is in the dealers that are large enough to afford these positions, and their rental business is large enough to carry that kind of overhead. What I discovered is as the rental business grows, the necessity to have dedicated personnel, the answer for that presents itself. One or two people just become overwhelmed and there are problems that are encountered. These are roles. The first is the rental coordinator, second is the yard coordinator, and of course, third is finance and administration. Typically, I found finance and administration and rental coordinator combined. Within smaller dealers, I found two people involved in rentals at the smaller dealerships, yard coordinator, and then this combined activity. In the larger dealerships, all three of these exist. Here's somewhat of a job description for each one of these roles. Talks about the objective and the document trail that they create in order to help manage the business. Now, that's for outbound. Again, it's a leadership opportunity to empower the teams to focus on and execute key success factors. Inbound is where problems can be created, especially when pieces of equipment come back with different sets of tires on them or there's embedded damage. It still takes a rental coordinator to manage that process. The yard coordinator's role grows substantially. Product support is entered at that point. Again, finance and administration is a key component of that. Here are the job descriptions and the objectives, essentially, for each one of these roles. This aspect of running a rentals business as a leader is maybe the key opportunity really to get the team focused on what's important, and have them execute that. Those are the successful practices or at least a composite of the successful practices that were discovered based on the pilot sample or the 10 that were interviewed last summer. Let's pause here and see what questions this may have triggered. Sean, have you got any hold there? We do. This section actually popped up three different questions for you. The first question is, is what is the most common denominator in these dealerships that helps them with their process workflow, or at least the top three? I would say, that's a terrific question, by the way. I would say, first, it's a mental state, and then it's a very granular approach to managing rentals. Now, let me try to respond to that. The mental state is that rentals are not selling whole goods. To me, this makes sense to me, it probably won't to you, but to me, rentals are a game of inches. Whole goods are a game of Hail Marys. What do we need to do the last week to pull out this quarter? What do we need to do the last week or the last moments of this big bid with the state to get the deal? It's possible to pull out a Hail Mary and make the transaction happen. Rentals, you can't do that. Rentals have to be managed on a weekly basis, on a daily basis, on an hourly basis. Utilization is earned by the day. There's no way to jam an entire month's worth of utilization into the last week of the quarter. Doesn't happen. So it takes a very unique attitude to understand that, yes, we're selling a service. We're not selling a piece of equipment. It may become equipment that's sold. But the key here is a delineation in the leader's mind. I'm running two separate businesses that are really providing value to one customer. That customer is consuming two value propositions. So managing that way, I think is key. If you buy that concept that rentals are a process business, then I think what goes hand in hand with that is the idea, you can't run the business on an Excel spreadsheet. Being able to manage life cycle return on investment has certain requirements about it. Managing utilization, managing very tightly, the health of the equipment going out the door and coming back in. I mean, there's immense amounts of money that can be lost with equipment that comes back where damage is not caught. Then it becomes too late to bill it back to a customer. So a very robust documented outbound and inbound process that is overseen by the yard coordinator and the rental coordinator and integrated in the dealerships financial systems and billing systems, really key, really key. And the system essentially carries the business. So I hope that answers the question. Where I saw it, some not successful, so successful practices is dealers viewing this as, okay, we've just added another line of business, go sell it. And before you know it, they're getting their ass handed to them because they're losing money like crazy on it. What else you got, Sean? Can you explain what a dealer's moat means? Well, a moat, I'm a Warren Buffett junkie. And Buffett talks all the time about company's moats. A moat is if you think about an old English castle with that circle of water around it, that's a moat. And the idea of the moat was to keep the enemy away. I mean, that's the analogy here. A dealership or business or really anybody can build a moat around their business and make it very difficult for a dealer to find a weakness in your dealership. Let me give you a kind of a gross example. Let's say a dealership doesn't have rentals, but your customers are demanding it. Now, this is extreme, I get this. But the dealer is going or excuse me, the customer is going to go to another dealer and they're going to start renting from somebody else. And what's that dealer going to do? Well, they're going to start finding other opportunities at that customer. And you've lost your moat that you have built around your dealership. And you invited essentially that customer to talk to somebody else. Providing a solution becomes the best moat that you can provide. Look, an elegant way to address this is the idea of what you're buying when you go to Home Depot to buy a drill bit. You know, the salesman may tell you that it's a titanium drill bit and will operate at super high temperature. He's selling a product. A really smart salesperson will say, oh, you're not buying a quarter-inch drill bit. You're buying a quarter-inch hole. Why do you need a quarter-inch hole? And by the time you get done describing it to him, he's got you loading up the shopping basket before you go to checkout. It's been demonstrated over and over and over that that solutions-based approach drives revenue and it drives profitability and it builds this moat around the dealership that gives your customers no reason to go anyplace else. All right, Dick, one more question for this section. What's the best determination for addition to the headcount? Productivity and utilization would be a good one. Revenue per head is a good one. Some dealerships had dedicated sales and it was revenue per head. When you get into the back office activities, let's pick rental coordinator. When is it really net? Let's use yard coordinator. That's a more obvious example. When you start having equipment coming back and it's beat up and you're not catching it when it comes back into the yard, it's time to get a yard coordinator when your losses exceed the cost of that yard coordinator. So there's a measure of when to add headcount. Revenue generation and productivity are good ones. You will find that specific data in the annual rental report that was measured. But there's also the pain point of, I'm just kind of done losing money on this thing. What do I need to do to fix it? What this is demonstrating is that those roles are associated with mature, successful dealers in the rental business. Okay, let's move on. I appreciate those questions. Those are good. Thank you very much. Now, I want to talk about best practices. The foundation for best practices comes from the successful practices that were discovered and documented and somewhat tested from the onsite reviews that occurred. And then a survey for any of those of you who actually completed, if you were one of those 91 who completed the survey that came out, I think in March, and filled out the data, there was a qualitative survey. There was about, I don't know, 20 some questions, 25 questions. Those questions were founded in these successful practices. And what I was fishing for was the prevalence of successful practices. And then ultimately the correlation that may exist between those practices that are highly prevalent in dealers and had a positive statistical correlation to growth and profit. So, one of the cool things about doing a project like this is you get to make your own definitions. And what I have defined as best practices for the purposes of this are those successful practices that have a positive correlation to 2019 growth and or earnings before income taxes based on the data in the annual rental report. This is an opportunity on where to focus to go get short-term wins. I mean, being in the rental business and chasing butterflies for three months may not help profitability. Being in the rental business and knowing which practices have a positive correlation to growth or earnings before income taxes creates focus. That's the idea behind best practices. Now, I'm gonna throw up a bit of an eye chart. I apologize for that. This is not all incomplete. I wanted to pick out some highlights and I need to give the statistical disclaimer that although the sample size was good, there was a lot of noise in the sample. That is very common in initial samples like this. We'll need to do it once or twice more to get less variability in the sample results. But nonetheless, there were some positive correlations I wanna comment on and there were some negative correlations. I mean, scooch up to the screen and take a look at this. You will get a copy of it. What this presents is in the green, look on the left-hand side, it identifies the successful practice that does have some form of correlation to growth in earnings. Correlation just for definition is not predictive, it's not causal, but there is an association. And in this case, there is a mild to greater association between the practice and its effect on revenue growth or earnings before income taxes. So as an example, under strategy, the practice of having a growth-oriented intentional strategy, there's a high prevalence of that. It has a positive correlation on revenue growth and a high positive correlation to earnings before income taxes. If you look at business models, does a rental coordinator role exist? And I'm still baffled by some of these results. I've been swinging around on the numbers now for a week and I can only speculate on some of these things. I need to talk to some dealers to learn more about it. If a rental coordinator exists, there will be more revenue generated, but not necessarily more profitable revenue. And I apologize, folks, I don't have an answer to that. I am being entirely objective by reporting this statistic though. And in a way, I'm trying to set an expectation that if this result occurred for you, heads up that you may not make any money on it for a few months anyway, maybe a year, but you get more revenue out of it. Rentals report to the sales manager. There was a neutral effect on revenue and a neutral effect on earnings. But take a look at reports to a rental manager. You get a positive effect on rentals and a positive effect on earnings. That stands to reason. I think, you know, when someone is at risk on a line of business, manager or leader, maybe it's you, all of a sudden it becomes more right to make sure that the result is achieved. And then there's another, there's another several for business models and then there's quite a few for operations. I don't intend to go through each one here. I would offer this up. I guess it's kind of a cheat sheet to create a bridge. I mean, once you do, if you want to, once you do lay your hands on the rental report, there will be all the financial data. I mean, you'll be swimming in financial data for rentals. And then there will be the results of the survey, the prevalence, the bridge between the financial results and the survey results is a bridge between how rentals are led and managed, the practices, the prevalence of those practices and their association through correlation with financial results. I am really hopeful the next time we do this, we'll find an even, you know, less volatile sample. And we might, might get to the point where we have some sort of linear relationship and we can start demonstrating that if you do this, it will have this effect on revenue and earnings. We're not there yet, but hopefully that will be the case as time goes on. So, you know, this is a, this is a benchmarking tool. And in a way it's, it slides into creating focus. You know, there's a famous bank robber from the 30s and 40s in Texas. His name's Willie Brandt. When they finally caught him, they asked him, why do you rob banks? His answer was it's because it's where the money is. He had, you know, it was illegal, but he had focus on where he needed to go to make things happen. So there's a ton of content that I'm dumping on you out of the rental report. I do want to come back to item two, which is the leadership opportunity surrounding culture. If you go to the, you know, if you just Google competing values framework, you might even be more specific in Google scoring the competing values framework. There is a, about a 10 minute scoring process that you can have that you can score, that the principal in the dealership can score, your direct reports can score. And what it does is it winds up indicating the dominant culture that that individual who did the scoring sees in the dealership. And that scoring can be presented graphically. Take a look. This is a graph of a group of dealers. There were 12 dealers, I think that responded to this. They each, and they were the principal owner of the dealership. They use this to score what they felt was their current culture. The question I gave them is, okay, what do you need your culture to be 12 months from now to remain competitive, not become more competitive, but to remain competitive? What they came up with was, okay, we still like the family atmosphere. We like the cooperativeness and the teamwork. We really like our focus on the marketplace. I don't want to change that. But we've got to be, and for how these graphs go, this is a substantial change. It doesn't look like it. It's a substantial change over 12 months. We need to be more innovative in the solutions, the products, how we sell our customers, how we create moats. And we need less process in the process of doing it. That makes sense. What this invited then was a discussion. Well, how do we make this shift? How do we make this shift? The answer here typically is more technology. What do we do to execute transactions mobily? What do we do to take more paper out of the process? What do we do to become more customer friendly and rely less on bureaucracy and more trying to understand why our client is buying a quarter inch hole? This is often accomplished by molding and sending plans through rewards. It's accomplished by holding out people that create really new things that gain traction in the marketplace. And then having them promoted, do Zoom conferences within your dealership to talk about, look what I just found out I could do and get everybody behind the idea. This is a really nifty little tool. I could talk about this all day. It's almost a presentation by itself. What I'm trying to demonstrate is that culture is not this ambiguous thing that sits out there that if you've got 100 people in your dealership, you have 100 different definitions of what culture is. Again, this tool is 40 years old, is award winning and based in all kinds of science. So it's very reliable. What it does do is trigger emphasis and enables a leader to shift culture. So use it in that way to accomplish the seventh piece of that framework for leading change, which is to anchor, guide, anchor, and then it should be guide, major and anchor cultural change within the dealership. And let's pause there before I make some closing comments to hang this together. We have a few minutes. What do you have, Sean? We've got a couple of good questions here, Dick. The first one says, I haven't heard any concentration on service. It's easy to rent a piece of equipment, but dealerships cannot jump to the pace of rentals. How do you change the mindset of service at dealership levels, which is essentially, which essentially drives rentals? Well, you know, I guess my blunt answer, there's no silver bullets. Where I have seen competitions around service is when a rental piece of equipment comes into the service queue and your service manager says, look, I got five customers screaming in my ear right now and I've got this piece of equipment that I don't have a customer for. I know what's going to get done and I know what's not going to get done. So there is a mind shift that a leader will help the service manager understand that we can't rent that machine again. We can't generate revenue again until it gets through product support. The larger dealers that I examined have a dedicated product support, at least triage support that ensures the health of the machine, the safety of the machine and makes it available for rent. In those organizations, which is the most prevalent model where rentals go through, you know, general product support, I've seen a couple of instances where product support is compensated, at least the product support manager is compensated on the number of days. Other words, they have a target that the number of days that a piece of equipment can sit in product support before, you know, it's a target with an incentive and a penalty associated with it. There is some data about that in the annual rental report and, you know, as we continue to roll out this report, there will be further, there will be further seminars or conferences, documents issued on this. It really opens up the topic of how do you measure performance of utilization within rentals and what role does product support have in that. So I know I'm teasing you with that a little bit, but time limitations keep us out of that content for the moment. All right, great. So one more question here. It says, I see there's an average hold time on dealer-run rental of 30 months, but on nationals and independents, the whole time is usually between 48 months to 72 months. Variance usually runs in categories. Are you showing the shorter interval in dealer-run rentals because of used equipment sales opportunities? Yes. First, the objective response to that question is when the survey went to, when the 91 people responded to the survey, they had ranges. I believe there were five ranges. How long do you hold your equipment to maximize your return? And it went in 12-month increments, zero to 12, 12 to 24, et cetera. The response, the average came up at 30 months. So I'm interpreting for that to mean 36 months. So the prevalence, the highest prevalence of hold time within dealerships is 36 months. And there is a, I believe it's a positive relationship. I'm looking here, I'll have to, I'm running out of time, but you can find it in there. The correlations are positive for that hold period. So yes, it's different than what you might find in the nationals. And it's of course different based on the size of the dealership, but that is the composite view of what's happening with dealers at this point. Okay. I got about two minutes left here. Let me just come back and tie this together a little bit. I'm urging you to think about this as a framework. Now, of course, this isn't dedicated to rentals. You can use this as a framework throughout your dealership. And as you go into your 2021 planning process, I hope you're going into a 2021 planning process. There should be a pretty robust discussion about what we need to change in the organization. Typically there's, you know, there's a lengthy discussion about it. Maybe some budget is thrown at it. Maybe somebody's made control and then it flops by about April. It flops. The value of this particular framework is that it creates a way to greatly enhance success and take time out of the change process itself. You'll get to a quicker institutionalized answer by deploying this. This process applied to the data that comes within the 2020 annual rental report. Pretty powerful stuff. You know, I know that I'm completely biased about this, but I've been doing this sort of thing for 45 years. There's some good stuff in there that I hope you'll find useful. And I know the AED will continue to add value to this report over the next 12 months. And finally, I thought I would throw up a little bit of a scary picture just to leave an impression on you. Despite everything that we're talking about here, you know, I think Stephen King, I took a couple liberties with this statement. Let me admit it. I think Stephen King has got it best. Where he's saying that I don't care how smart you are. I don't care how good of a lead you are, what your processes are, what your data is. All of that's not worth as much as just working really hard to make it go. So I'll leave you with that comment. Sean, we're exactly, my time anyway, 1125. So there you go. Great, Dick. I got one more question for you before we head out and break for lunch. This is, do you have any findings you can share about add-on rental sales like damage waivers, etc. Insurance-backed versus self-funded and their impact? Well, you know, insurance would be for Nick. You know, that's an area I have no expertise in and that's like my area of competency. When I made comments earlier about this robust outbound and inbound process, there is, we did create through the course of doing these reviews, very substantial process flow charts for outbound flow and inbound flow. I do not believe there is a decision yet within the AED on how to provide that data, if it's going to come with the annual report or not. It does talk about the role of, actually, it shows the process for finance and administration and the rental coordinator to get the necessary documentation and, you know, that's legally defensible to make sure the equipment is insured when it gets in the hands of the customer and to assure the customer can't wiggle out of damage when it comes back. So that will be, you know, I'm sorry to tease you with it today. There's just not enough time. That will be documented as more is rolled out around this report. The last appeal I have, Sean, is, you know, this was the first crack at this thing. We would love to continue to grow its value. If you have comments on other aspects of either the survey or the data to be collected or the process, get them to the AED. I mean, we're dying to turn this into an annual report that will continue to help you manage the performance of your rental operations. Thanks, Sean. Great. Thanks, Dick. Hey, just real fast, I think it'd be beneficial if you could give out your email so as people read through this report, they can ask you questions. Okay. You know, let me warn you, I am not selling anything today. I am not in a revenue generation mode. I do this really as something to keep my mind engaged and just, you know, the curiosity with dealerships. So I'm happy to answer some questions. I am not in the consulting business, though. I really am trying to be absolutely objective and straightforward to just help the industry. You can reach me at my email address, which is rstewart, that's one word, r-s-t-e-w-a-r-t, the character underscore, the word consulting, and that's msn.com. Great. Thank you, Dick. Just for the sake of time, we're going to keep our comments short. I do want to thank JT Bates again for sponsoring Dick's session. And we will reconvene at 1 p.m. Central Time. Also, before you go, please check out the chat box. There is a four-page PDF that you'll need to download for the workshop in the next session. Enjoy your lunch. We'll see everybody back here at 1 p.m. Central Standard Time. Thank you so much.

T-Base Group

Rental Equipment Protection

damage waiver

certificate tracking

program management

consulting services

leadership

rental strategy

business model

best practices