CED

Profit Improvement Report Moving Forward Pricing will probably always be the most difficult decision process for distributors. From a marketing perspective, no firm wants to be underpriced. From an operational perspective, there are lots of pricing decisions to be made. Despite these issues, there is a substantial gross margin and profit opportunity to be seized by avoiding an automatic response to opportunistic buying situations. Such situations must be used as profit generators. n A Price Cut That Would Maintain Profit It is possible to estimate how much firms can cut their prices and keep profits exactly where they are at present. Unfortunately, an estimate is all that can be provided without some extensive financial manipulations. The formula for holding profits steady is: Current Cost of Goods Percentage x Size of the Supplier's Price Reduction = 78.5% x 2% = 1.6% To a certain extent, this represents something that maybe nobody should know. It creates a real temptation to cut prices "just a little bit" when opportunistic buying situations arise. Firms should not try to simply hold the line on profit. They should use supplier price reductions as a vehicle to improve profit. Dr. Albert D. Bates is founder and president of Profit Planning Group. His latest book, Triple Your Profit!, is available at Amazon and Barnes & Noble. It includes Excel templates for understanding the profit structure of the firm and developing meaningful financial plans. ©2013 Profit Planning Be the #1 Dealer with the World's #1 Business Analytics #1 Mobility Solution #1 Business Management Software All on a Single, Fully-integrated Dealer Management System B4 Consulting helps you lay the foundation for success with SAP software. Integrating and optimizing all your business operations, SAP gives you access to real-time information – anytime, anywhere, and on any device. Be the #1 Dealer with B4 Consulting For a Free Consultation, Email: hem@b4-consulting.com Group. AED has unlimited duplication rights for this manuscript. Further, members may duplicate this report for their internal use in any way desired. Duplication by any other organization in any manner is strictly prohibited. B4 Consulting, Inc. +1 877 777 9480 www.b4-consulting.com September 2013 | Construction Equipment Distribution | www.cedmag.com | 41 38_Bates_Profit_Feature_KP.indd 41 8/28/13 12:31 PM

• Cover
• Feature: Credit Aplenty: Experts say the only thing that's tight in the CE credit market is the relationships they build with their dealer and contractor customers.
• Cover Story: The Dealer's Guide to ICUEE: Dive in with your customers at the "Demo Expo," and be sure to visit our featured exhibitors and CED advertisers who are looking to do business with dealers.
• Feature: If You Are Helping Me, I Will Buy From You: As the ICUEE show approaches, we caught up with this year's NUCA chairman for his industry insights-- and found out what contractors like him are struggling with most.
• Feature: Solving Our Great Big Workforce Problem: After all this time, we're still wiping mud off the image of "vocational education"- but an exemplary model of cultural respect for the tech is plain view.
• From the Chairman: Engage your leaders in AED's hallmark experience.
• Editor's Note: Six ways to stay relevant in the hyperconnected world
• On the Numbers: LKE in danger, grassroots work is urgently needed.
• Recruitment & Retention: What it takes to get the rockstars
• Aftermarket: How to reverse the parts business tailspin
• View From the Hill: Finally, a fresh way to fund highways
• Inside AED
• Groundwork
• Industry Beat
• Play It Safe
• Advertiser's Index
• Dealer Data
• Taking It To The Street-- Al Bates' latest Profit Report
• Little Did You Know: Supreme Court Has Been Minding Your Business
• A Closer Look: Versatile Argo ETVs Go Where Others Can't