The Future of Equipment Dealerships: Insights from Texada's Matt Harris

Yeah, as you said, Ron, we are a software company, Texada, and we have a software platform that's software as a service, i. e. it's cloud-based, and we help equipment dealerships and rental companies manage their sales. their service, and the rental sides of their business. What makes us unique is that in several things. First, we are the only company that will enable a dealership or a rental company to manage both their sales, service, and rental in a single platform in an integrated way. And so we do all three of those, and I'll describe more about what we do a little bit later, very, very well. But we let a dealership... for a rental company really bring the three components of their businesses together on an integrated basis. That's one thing that we do very, very well. The second is we are a modern platform. So we are software as a service, which means that all of our software is in the cloud.

There's nothing that our customers need to deploy on-premise, no servers, no IP room, no networking or anything like that. We handle the software. infrastructure, we handle the security, and we do that all in the cloud. And so when it works through a browser, it works through mobile applications. And so we take care of that, all the IT side of it for our customers. Because we're also in the cloud, our data is also very accessible. So we have access to our applications. through interfaces that make it easy to integrate into other things our customers may have, as opposed to very involved and complicated. So that's the second reason why we're different. And then the third reason why we're different is this industry and equipment dealerships and rental houses is all that we do. We've been in the industry for 30 years. Our businesses were born from an equipment dealer and a rental house and came together.

We have people in our organization who have been in equipment dealerships, who have been in equipment rental houses. They are installing our software. They are developing our software. They are selling our software all throughout our business. We have people with deep, deep, deep intimacy and understanding of equipment dealers. And this is not... This industry is not one of 20 or one of a thousand different industries that we serve. It's all we do. And we are super excited about the industry, where it's going, our potential contribution to it. And yeah, that's a little bit about Texado.

Yeah, we added up like we did an exercise and we added up, especially in our customer facing organization. So sales, implementation, training, support, the total number of years that our team has in actual dealerships and rental houses. And I think it was approaching something like 450 years. And so it's a non-trivial amount of knowledge. And so it's not only it's understanding of how our customers work, but also what their challenges are and also how some of the things that we can do can help and make a difference.

Yeah, we are putting, we are going to be at AED. We're going to have a great presence there and talking about our entire suite of software. And I'm also doing a presentation a bit about the trends of digitization in the industry. As you and I spoke previously, there's a dramatic opportunity for dealerships in particular to digitize. their businesses. And, you know, we can put some meat on that bone too and talk about what it means. But the way dealerships used to operate cannot be the way they operate into the future. The competitive market is very different. And so, and other businesses trying to take their customers post-sale, it's very, very active. We see also that dealers are not only concerned about, you know, other competitors with other brands in their regions, but they're also really concerned about competition from their own brand partner, their own OEM partner.

And that's actually becoming a number one concern for dealers and dealer principals. So the ability to compete, to understand their customers. much more to use data to inform them more on where selling opportunity and where growth opportunity may be, to use data and automation to help them create new business models, new ways to add value to their customers. These are all things that are top of mind for dealerships now. in the face of what is potentially a very disruptive time for them. And so that's what we'll talk about, is what are these disruptions? How can we be thinking about them? What are our avenues to improve? And where can software companies like us or others, how can a dealer think about using software to help build their business?

Yeah, I think I think you nailed it. I think that, you know, the the the beginnings of software in the dealerships started in the back office with the DMS environment, which is accounting and transactionally based. And then, you know, the DMS is expanded. And they're trying to go out. But there's this perspective of accounting or transactionally related processes. And that's an approach. The other approach is one where Texada and others have taken. We didn't start from the accounting transaction and then try to go out. We actually started. out and then are trying to come back in to help a dealer manage the process. What's that mean? We start with the customers, which is the key assets of a dealership. And then we start with the equipment, which is the other key asset of the dealership.

Management of the customers, we call it customer intelligence, understanding who the customers are, what they're buying, what the opportunities are, what their history is, what their future could be. That's what we bring together. And then we... manifest that in data and information that our customers can use. And then understanding of the equipment and the status of the equipment, whether it might be in need of service, whether it's productive, where it is, and the understanding of the equipment helps them operationalize some automation and workflows that a dealership can help them make them. more efficient, but also give them more value add as well. And for example, by understanding the equipment and the needs of the equipment, our software can tell the dealer when their customer may need a service appointment. So for a hydraulic fluid change or a transmission rework or something like that.

And so our software understands that from the equipment. We let the dealership know. We tell them when a service availability could be, and then we help them schedule service technicians for that. And so that's the outside-in approach. It helps our customers, A, better understand the end users, their end users, but then also helps them operationalize better service for their customers, too.

We're trying to do something unique for sure. But we're very, as you mentioned, focused on solving the problems that we understand our customers and our industry have. And disruption is happening. It's on the horizon. It's the number one fear of dealer principles right now. In order to get through that, they want to and need to understand their customers better and through that understanding, identify growth opportunities. Another great example, when all dealerships want to sell more stuff. Isn't it wonderful to understand if you have a customer who's continuously renting something from you? Wouldn't that be a great lead for an equipment sale? It sounds completely obvious. You know how many dealerships actually do that? Very few. Very few. And increasingly, there's a desire to get into both heavy and general rents. And there's a great business model in there as well. But turning that information into a sale.

Or using service information, if equipment is in for a long-term service, a transmission rebuild, using that to motivate a rental opportunity. Let's rent them a piece of equipment to backfill that. That is almost never used. So what a great opportunity, we think, for the dealership to understand across their lines of business. what they sell, what they service, their parts and what they rent, where they can grow in terms of share of wallet. If I could use your, I'm going to use your phrase of churn. Because I think this is a revolutionary concept that I will give you credit for 100%. And the concept is that the average dealership is churning about 60% of their customers every year,5% of the customers a month,60% a year. What that means is that from one year to the next, only four out of 10 of a dealer's customers will do business with them, you know, went from one year to the next. So this dealer to grow, they have to re-find.

60% of new customers from the previous year, which just makes it monumentally difficult. If they had the ability to understand their share of wallet of their existing customers and could not only sell them equipment, but could rent them more, but can provide more services to them, more parts, that's an ability to stay engaged with that customer from one year to the next. And it's the fastest and most surest way of growth. But dealerships aren't doing that. They're churning 60% of their customers a year, which is astronomically hard.

Yep.

Yeah. I think that it starts with the understanding, as you suggest. So if a dealer understands what they're churning in their customer base, what percent of their customers are they doing business with from one year to the next? That's likely less than they think. And what that means is there's a tremendous opportunity that they're missing out on. So when that customer of the dealership buys that equipment, for sure. They're getting that equipment service or they're buying parts on that and they might even be renting things from somebody in the next year. But they're not doing it with that original dealership. That means they're doing it with somebody else. And the dealerships don't understand that. They're just actually fulfilling the number one fear that they have of being disrupted. So understanding that concept of churn is job one. Then what are you going to do about it, right? So the second thing to look at is, okay, what is your...

defining as what we call share of wallets, right? And so of that, of a given customer of a dealership, what could, you know, potentially they could offer to that customer? What, in addition to the sales, which I'm sure they pay a great deal of attention to, what would that mean in terms of service? What would that mean in terms of parts? Is that dealer renting other things from other people that we, where we could provide that capacity? I think it's really important that the dealers, and they're almost going to have to disrupt their sales model as well. The dealers understand holistically how to engage with their customers. And by, here's what I mean by disrupt. When a dealership is engaging with a contractor or a customer, they have the sales team is obviously trying to sell them stuff. They have a service department that obviously wants them to get their maintenance or their repairs done.

They'll have a parts staff that's obviously going to take their parts orders. And then they'll have a separate rental side. None of these businesses know what the other one's doing. They do not have a single person. And in the rare case, they have a single person that knows holistically that dealership's engagement with that contractor, that customer. And that's the difference, right? It's understanding all the opportunities to plug into that customer versus understanding a single line of business and that representation in that customer. It could be that the sales team says, hey, I'm going to sell equipment one time every seven years. And they'll say, hey, that's a home run for us, right? It is on the sales side. But then every six years, somebody else is selling them parts or service or getting their rental business. And that is what we need to change.

The sales mechanism and the customer engagement needs to break down the walls between business lines.

And that's, I think, you know, it's not all doom and gloom. I think, you know, the questions are being asked now. It's like, how do I do this? How could I leverage this information? How can I have more engagement with my customers? And so I think the right questions are being asked. We've seen some really interesting research that tells us that the expectations of dealerships. to digitize, meaning to engage through the web and other means with their customers for sales, for sales of new equipment, sales of used equipment and rental equipment. That is expected to triple in the next four years or so. And so there's that intentionality is there. We see it in our customers as well and what they ask of us. The desire to create more value within dealerships customers is clearly there. And offering, as you mentioned, it's not necessarily a piece of equipment sale, but how do we offer a more broader service and offer more broader productivity?

And there's some interesting models that are coming into place now that are early, but are really interesting. So I think the desire is there. And to your point, giving dealerships the tools to do it, the information that they need, and also making it easy for them is the challenge of all of us serving the industry then.

Yeah. And you brought up two really, I think, important concepts. Well, three, if you include security. The first is the development of infrastructure, developed world, undeveloped world. I mean, I speak to peers of mine who are in other companies. in other types of industries. They're not in construction or equipment. And, you know, look, there's a lot of concern around, you know, is there growth? Is there contraction? You know, is what's happening in the world economically? And to be honest, we don't see that in our industry, right? We're extremely, we're in a great state right now. You know, there's a continuous investment in infrastructure. And then if one component of building construction is falling off, inevitably there's another component that is picking up. And so we're in a great place in construction. And so to some extent, we're, you know, we have a sort of a bounty of a market that is really, truly unique in this day and age.

Our peers in other industries definitely don't see it the way we do. They see a very different macroeconomic state. So on the one hand, we're very lucky. But to your point, then, this luck then puts continuous demands on a few precious resources that are highly finite that is really throttling the growth of the industry. For a dealership, we consistently hear that. Act as the service technicians, train service technicians is the number one limiter to grow. And you'd ask yourself, well, OK, I understand how that would limit a service department, but why don't they just sell more? Well, the people who are doing the set up the equipment and the free delivery inspections and everything like that are the service technicians. The people who are taking care of the rental equipment and the rental fleet to make sure it's ready for the next. the next cycle are the service technicians.

So the common denominator across all the lines of business are the service technicians. And that's the number one throttler that we see with the largest and the leading dealerships in the continent right now are telling us this. So everything that we do to help with service tech productivity, to your point, getting more service technicians, getting them onboarded, trained. when they are trained, making them more productive, that is an unleashing power to the industry. The macroeconomic conditions that we're in are fantastically good. Knock on wood, they'll be that way for a while. We need to now give our dealerships and our customers the ability to unleash some of their resources or get more value from their resources to take advantage of that.

No, I think you bring up that. You bring up a great point. And increasingly, the people in our industry, and it's not just companies like us, software companies, it's actually in the dealerships, in the rental houses. These are real knowledge workers. They, you know, their understanding of the equipment, of their customers' workflows and processes, of the intricacy of the engineering, of the work that's being done, of the engineering, of the equipment being provided. I mean, it's incredibly profound what they have to know. And so when you think about the generation of knowledge workers who we want to have in our industry. You know, we're competing against all the other industries, you know, financial services, health care, you name it, hospitality that, you know, could have access to want knowledge workers as well. So how are we going to compete? You brought up a really great point. Tools, tool set.

We, you know, nobody wants to come into an environment where they're working with a set of tools that are yesterday's, you know, yesterday's tools. In the software world, we call that green screen. Right. You know, nobody wants to come in and start working on a bunch of what, you know, this green screen stuff that was developed in 1960, which is a great decade. It's when I was born. And so not in 1960, but the decade. But they want to work on modern things. They want to work on, you know, off of their phone, their tablets. You know, you mentioned artificial intelligence. They want to feel like they're embracing and have access to. you know, some of the latest, greatest, the trends that are important to the world that we read about and hear about all the time. And so that's an important component about, you know, attracting folks like this.

The other side of it then is, you know, once you have somebody in, you know, in the generation, as you mentioned, that is with us now, they're not like, you know, you and I and others and, you know, where we would, you know, want to be in a job for several years and, you know, and sort of... prove the points that we could make in that given job. They're in a job, they want to do it, they want to learn it, then they want to do something else, right? So, and that's going to happen. If a dealer or whomever is not continuously finding opportunity, right, for these knowledge workers, they'll find it one way or the other, but they'll just find it, you know, somewhere else. And so it's continuously refreshing, which means Give them the tools to kind of start, learn something, but then give them new tools to help them learn the next thing.

And continuously helping them understand what a career progression could look like from one part of the business to the next. If the expectation is, you know, they're only going to be in that job, in that line of the business for 20 years, nowadays, that won't happen. Right. There's a there's a much different eclectic kind of view on work and people want to be doing and learning new things. And so that's important that that's an important component of it, too.

Yeah. And I think, you know, to your point, we talk about artificial intelligence. I think, you know, we and I have a little bit different perspective on that. And, you know, borrowing an expression that I recently heard that I really believe is that I don't think for any one of us or any one of us who work in our teams. I don't think any of us are going to lose our job to artificial intelligence. I don't either. But I think we'll lose our jobs to people who know how to use artificial intelligence better than we will. And the point that's the operative point is that they know how to use it. And so AI is a tool and it's a tool that will help us do some things better and faster. The opportunity that our industry has is to identify uses of that tool. The requirement of folks like myself and technology vendors to the industry have is to make it easy and obvious, to integrate the tool into the normal daily activity that somebody is doing.

not as a replacement for that activity, but as a way to make it faster and easier and better. And I think that's the opportunity. So that's where, when we talk to our customers, thinking of AI as, you know, AI won't put them out of business. It's the dealership who's using AI better than they will who's going to put them out of business.

Yeah, yeah, yeah. The distribution of information and just the amount of information that is available is just accelerating and accelerating. I love it. And on the one hand, you almost get into a panic mode. I'm like, what am I going to do with all this? I'm like, Lord. And I think that's where there needs to be a thoughtful approach to, you know, there's, there's, there's, and I should say there's data and information, right? Data is, is everywhere. Doesn't mean it's necessarily helpful. It doesn't mean it's informing us. It doesn't mean it's doing things that are, it's useful for us. And so the, the opportunity, the requirement almost is to take that data, filter out the 99.9% of it that is not information to distill down to the. 0.1% that really is information. And that's hard to do, to really get into that and to really, you know, look at what matters.

But to your point, I mean, that is the key, you know, use the data to create information that will give you, you know, the understanding of prioritization of your business. Where are you churning customers? You know, where are you not churning customers? What's working for you? What's selling better? What's selling worse? When you rent somebody a piece of equipment, how often is that turning into a sale downstream? How much longer downstream does it take to convert that into a sale? I think those are all the bits.

Yeah, you talk about a disruptor. I mean, man, that's a whole secondary market that didn't exist. And now the adoption, their adoption of data and system, you know, data on the price points of equipment and the accessibility and then, you know, and then the productivity tool through, you know, keeping its equipment going with parts. I mean, what a smart move. Right. But if the dealerships or what's the dealership going to do, like stand by and nothing. And like, of course, they they have got to do something. That business, I mean, is all materialized in what, two years, three years. Yeah. Yeah. That's come together. It is completely potential of completely disrupting the industry. And that's the that's that's what we have to be in front of right now. It's exactly something like that.

I think they have a very smart CEO who I've heard very good things about. But yeah, it could be that the average employee at Ritchie is absolutely petrified. But you can't argue with what they've done, and I don't think that's been an accident. The pieces that they put together there and the ability to really holistically create a secondary market that is informed by data. and supported by accessible spare parts, I mean, it's genius, right? That's the best thing to do. If they have a service infrastructure for that, they're going to be, that'll be it, right? We'll have it all. And maybe they're working on it. Who knows? But it's a really smart thing. And, you know, that didn't, that's all brand new, right? It's all brand new. And that's what, look, there's nothing in our dealership that's preventing them from really thinking about using the information in that way as well.

And they have access to and the use of very sophisticated data, or they can. And I think they have access to and understanding of really, really, really sophisticated models and how their equipment or their customers' equipment consume parts. They obviously know their service businesses extremely well. They have touch points that are very strong. They can really compete effectively. They just need to use the tools and empower the teams and themselves to go do it.

Oh, I would just say words of wisdom. Well, thank you for having me. We're really excited. The first of thousands of these podcasts, I'm sure. And I would say words of wisdom is keep on espousing your. your thoughts. When I first met you, it was at last year's AED meeting, by the way, I was blown away by the concepts that you were bringing to the industry. So I think you're continuing rejuvenation and ideas that you're bringing to us all. Please keep on doing that. It is refreshing.