Columnists, Thom Finn, V4I3

Managing Your Dealers


The Pareto Principle, sometimes referred to as the 80/20 rule, tells us that 20 percent of the items on your to-do list will bring 80 percent of your results. Or 80 percent of your profits come from 20 percent of your products.

Or 80 percent of your total sales come from 20 percent of your dealers. How about 80 percent of your headaches come from 20 percent of your dealers? I have worked with some shed builders who report this was as low as 70/30 and a few who believe it to be 90/10.

The exact percentage is not as crucial as understanding this law in business. To me, it means not all your locations, products, or dealers behave or produce the same. I recommend you grade your dealers using this 80/20 rule.

Most of the dealers I personally have interacted with fall into the 80 percent category. These folks seem to focus more on your wholesale prices being too high, rather than why they can’t show up for work by the posted sales lot hours. They complain more about the quality of the units rather than the weak expectations they set for customers for delivery. They would much rather complain about the shop’s production schedule than learn an effective way to use social media for lead generation.


This past year, the complaints from dealers have reached such a high point that I now include “exploration of a non-dealer/ own your stores model” for some clients. I have informally experimented comparing two groups. Group A: builders who have the traditional dealer network setups versus Group B: builders who own and manage their own locations.

After studying these two groups, I saw three clear differences. First, the year-end bottom line net income for Group B is better than A. I love analyzing numbers because they are non-arguable. Group B showed higher sales numbers and a lower total cost of goods sold. You have a direct employee managing your sales lot. No more excuses for why they are not there, why phone calls are going unanswered, or why they haven’t cleaned up their side of the street called customer service.

The second difference is the advantage the B group has with cash flow. With the B group, policies are easy to come up with and enforce, or even change throughout the seasons. Because the sales lots are managed 100 percent by the builders, the rules of the game benefit the owner. Set clear rules for who gets the commissions when a lead is contested. I personally like the simple “he who closes it, wins.”

Compare the Group B policy, that demands full payment go back to the builder right away, against the traditional dealer model where the builder waits five weeks for the money only after three phone calls, and then only partial payment for the sold building arrives. I listen with disgust as builders tell me of their cash flow problems while they finance dealers’ overdue money. And I feel like I’ve been punched in the stomach the few times they admit the dealer embezzled their money, or outright stole it. I was horrified the first time I heard of a shed dealer who was excessively
behind turning over payments for sheds sold. Even though he was entitled only to a percent of the sale, he collected the full amount and wasn’t turning over the money for it. My friends who own their lots never have this problem.

Finally, the third transparent difference was the better condition of Group B’s heads and stomachs. From what I have deduced, I believe shed builders are better business owners than shed dealers.
So, when they control their individual sales lots, it shouldn’t surprise us they do it better. I have lost count of how many dealer meetings put on by builders quickly disintegrate into complaint sessions where the poor builder is all but pelted with rotten eggs and tomatoes.

When I first started coaching, dealers behaved and bought inventory in advance at a wholesale price. It was the responsibility of grown-up adult business owners to ensure they sold this inventory throughout the year, adjusting their rates and discounts to balance profits and sales. Butmaybe 10 years ago, the dealers started asking for consignment. They say it never hurts to ask. I once asked my heavyset sister in law if she was pregnant. She only started talking to me again this past Christmas. Under this new set up, dealers pushed builders to pay for 100 percent of the building costs up front, then pay them months later for the building.


Enough about the problem. I personally don’t like when someone complains excessively about the issue. Let us now focus on a possible solution. Many business experts talk about a long-term strategy for a company. An example of a long-term strategy you may want to consider is to move away from the dealer model toward a model where you own and manage your own stores. There is a rumor floating around that auto manufacturer Tesla will roll out a shocking model that would bypass the traditional dealer model and sell directly.

Below are several strategies I have seen work. Try them on, customize to fit your situation, and course correct where necessary.

Set your expectations for what a winning dealer looks like. Is it number of sheds sold? Dollar value of sales? Percentage collected, or the number of inventory turns? What you measure is not as important as deciding on the end deliverable and making that clear to all re-sellers.

In my experience working with relationships that have soured, most can be traced back to management’s lack of clarity about their expectations. Years ago, I got screamed at by my college football coach. I wasn’t the sharpest tool in the shed, and I always doubted what was expected of me. The coach would have saved a lot of time, indigestion, and his vocal chords had he first made sure I understood what he wanted from me. Same with dealers. You forfeit the right to be frustrated or upset when you have not explicitly communicated what you expect of them.

Next, rank them. Whether by sales, by units, or by turns, choose what is essential to you. The 80/20 phenomenon will appear on your list. Knowing which dealers are above the line saves you time and leads to higher profits because you are working with more willing people. A typical mistake that sales managers make is to focus on the bottom 20 percent of salesmen rather than the top 20 percent. Take your winners and devote 80 percent of your energy and attention to them. I have spoken at two kinds of dealer gatherings, usually on my Systemized Way to Sell a Shed. Group A brings in all the dealers. Group B invites only the top 20 percent. One hundred percent of the time, I have returned the dollars invested back to the builder when I speak to Group B. Group A usually has too many closed minds and an epidemic of “I know it all.”

Next, move beyond managing to genuinely coaching the dealers. Ask “why” frequently to uncover roadblocks encountered by your all-stars. If you observe the salesman struggle with, say, time management, you are wasting your breath talking about conversion rate strategies. It’s putting the cart before the horse.

After this, work with the dealer to create a customized business sales plan for them. But if they ignore you or blow you off, prune them. Move on to someone who is more receptive.

Then move on to accountability for their activity. Responsibility is the cornerstone of my coaching. All day every day, I hold business owners and managers to account for what they should do. And it works every time. And when they get up against the wall, I’ll dig out a strategy from my bag of tricks. I’ve seen shocking improvements just by holding a man accountable for what he knows he should do.

You could also place your emphasis on sales management training rather than on sales techniques. To me, the outline for how to sell a shed is only five steps. Most builders with weak sales need more work in sales management than techniques. Sales management is accountability for activity. Introducing accountability to your dealers means you help guide them to a mutually agreed upon
minimum level of activity.

You could also increase your praising. I would be hard-pressed to find another group of workers other than shed dealers who need a 5 to 1 praising ratio. For every time you correct a mistake or point out an improvement opportunity, you should give them five positive strokes.

Choose your battles wisely. Since nothing will turn a questionable dealer against you faster than to call out the log in his eye, make it count. I start with the most grievous complaints: payments
owed to the builder. I may go crazy with the way he fills out an order, but I am going to pick the battle and focus instead on the $15,000 he claims was sent into the mail three weeks ago.

Make a private list ranking performance— highest performer at the top, and the worst performers at the bottom. I would be tempted to slap it on the website for the whole world to see, but don’t do that. Instead, keep a record of the 80 percent of losers and 20 percent of your winners. The losers make up a watch list. In the future, you should start looking at replacing those with a dealer that performs better.

A word of advice: When a dealer bristles or resists too much, that’s big red flag to me. The further entrenched someone is in their old ideas that don’t work, and the more unresponsive they are to try something new, the faster I move along to someone who is desperate enough to try a different approach.

Comments are closed.

Current Issue

April/May 2024