By Jordan Arsenault, Nick Mavrick | November 5, 2024 | LearningWithoutScars.com
Don’t dig for data. Let data dig for you.
Big trouble: that’s how we are ending 2024, most economists agree. Inflation, investment bubbles, over-the-top government spending, technology disruption, dealer margin and market share compression and the exceptional market power of two major rental companies. How can your dealership thrive with more instability ahead?
One may turn to Warren Buffet’s counsel: “I don’t look to jump over seven-foot bars. I look around for one-foot bars that I can step over.”
In your construction equipment dealership, would you allocate capital differently if you knew how much revenue and profits were created by the top 10, or 20 percent, of your customers? What if you learned that 5% of your customers generated over 70% of revenue & profits? Or that your top customers’ life-time value was 5X or 10X larger than that of your average customer?
Consider the following construction equipment cases:
- Major construction equipment service company: 23% of customers, 87% of revenue, each customer generates $43k annually, 5X greater than the next customer group.
- Major equipment rental company: 3% of customers generate 62% of revenue and profits – only 15 customers per store, that each generate $250k annually 4X greater than the next customer group.
- Major construction equipment dealer: 11% of customers, 83% of revenue and profits.
None of the above had been using the proportionality of their data for 80/20 capital allocation, to manage their salesforce, or in short – replicate what they are doing well, to do more of it – faster.