What to consider before becoming a service dealer

In the last month we have taken on another engine dealership, MAN, to go with our MTU and Motors Baudouin agreements, but is it a good move to be taking on a dealership?

When Bartech was established, back in 1987, we were proud to be independent and could benefit our clients with the flexibility this gave. 

We already had extensive technical knowledge in the business, backed up with hundreds of manuals and technical papers and developed supplier relationships alongside our own in-house manufacturing capabilities to support clients, but we reached that point where that wasn’t enough.

Whilst this independent approach is still best for some makes and models, in 2012 we recognised to continue our growth we needed to be working on equipment that was new to the market and this gets more challenging when working away from the manufacturer or dealer network. 

With newer equipment, there are not the wider options available and the increased use of electronics and advanced technology significantly increases the risk of problems if you were going it alone.

To get extensive support, it makes sense to have an agreement with the manufacturer, which for service and parts supply would normally be in the form of a dealership. To make a dealership really work, it should be approached as a partnership, understanding what is expected from both partners and how both parties will benefit.

Usually, the manufacturer is looking for the dealer to provide:

• Marketing for their product through the dealers’ existing relationships.
• An improved support network with quick response to users due to their location and localised stock holding.
• Feedback on any issues with the product, operator opinions, and development in the market

Whilst the dealer benefits with:

• Credibility associated with a major brand.
• Access to restricted information and training opportunities.
• Parts discounts.
• Resources and contacts to approach new clients.

To put some of this in perspective, the last quarter of 2020 showed 25% of our revenue was directly on the two brands we represented at that time, but this is only part of the picture. Representation of these manufacturers actually led to developing relationships with operators who had contributed 50% of the revenue over that period. Business we were unlikely to have it hadn’t been for the dealerships.

Back to the idea of treating it as a partnership, the manufacturer needs to give consideration to whether the dealer is going to represent them in the right way because if not, their reputation by association can be harmed. From the dealers’ perspective, they need to consider the financial investment of training and stock holding, but also the restrictions that will be imposed by the agreement of territory, parts sourcing, and sell prices, which will control profits.

There are companies that take dealerships to the extreme and collect them like they are stamps, but to make them effective these are some of the key questions to consider:

1. Would this dealership allow me to offer more to current customers?
2. Would this dealership open up new opportunities aligned to my business plan?
3. Would the dealership mean I could no longer support some current customers?
4. What would be my investment?
5. Do I have the resources to be able to meet the manufacturer's and owner's requirements?
6. What is the expected revenue, profit margins, and investment?
7. Does the manufacturer match the same values and approach as yourself?

Each manufacture, agreement, and situation will be different and needs to be judged on its own merits, but if you are considering becoming a dealer, or want to understand a bit more of the consideration, feel free to comment, or send me a message.