Issue link: http://read.dmtmag.com/i/96778
Industry Beat ("Reflecting on the Business" continued from page 20) This change, coupled with dramatic economic hits in 2001 and 2009, caused American State to adapt their business model to the changing market conditions. When the crushing and screening division was launched in 1989, 10 percent of profits came from the rental market. Today, it's up to almost 50 percent. "In 2001, more people began renting equipment instead of buying it. That's when our inventory really started to increase," Lamberg said. "You were required to inventory more so you could have equipment to rent to sell. In the 2009 recession, an even bigger portion of our sales were rentals, and not necessarily rent to purchase because the banks were loaning out less money." The increase in available rental units, particularly mobile track units, ended up being helpful to smaller contractors, who could no longer afford to purchase equipment, as well as lucrative to distributors like American State, so long as the dealership invested in maintaining the equipment, Lamberg said. "If you sell a $600,000 crusher today, we're fighting to get 10 percent, or about $60,000," Lamberg said. "If you take the same $600,000 piece of equipment and rent it for $25,000 a month and you can rent it for six months, then you still own the equipment and can sell it as used and you have made a lot of profit. Naturally, as a dealer we would prefer to sell it because there are costs of maintaining the equipment, but when you look at it long-term there's enormous profit potential. The key to have a successful rental business is to maintain the equipment properly, because you're not going to get paid if the uptime isn't there." Facing Challenges Just as the composition of consumers has changed, so have their expectations. Lamberg, who started his career in the pre-Internet era, said the wealth of knowledge available at the consumer's fingertips has made for a more intensive sales process. "The Internet has made the customer smarter because he goes out and finds out all the data from every competitor, so he knows a lot more about what he's buying, not just what the few people who are talking to him have said," Lamberg said. Another challenge that's developed during Lamberg's tenure is finding ways to retain employees at the company after they had been trained. "The toughest part of managing this business is finding quality service people who want to do hard work, because believe me, working on crushers is hard work," Lamberg said. "We rely on local technical colleges and hire 22 | www.cedmag.com | Construction Equipment Distribution | December 2012 graduates and do our own training, which is more costly," he said, "and you always have the fear that you will get them trained and they will go elsewhere. Fortunately our company has a history of not losing people." Indeed, American State's employee track record is impressive. With the exception of one new mechanic, his 11-person aggregates staff has stayed with the company for at least 12 years, and some as long as 22 years. "These people have been like family to me," he said. "I've had the pleasure of managing some of the best, most loyal employees. It's been a wonderful journey." Lamberg attributes their retention success partially to a good benefits program, but there's more to it than that. "I think we have retained our employees because the owner has allowed me to do what I need to do to keep our people. He allows me to run this division like I own it. That's been hugely beneficial to me." Forecasting the Future After 26 years in the industry and serving on the KPI-JCI and Astec Mobile Screens Dealer Advisory Council from 2003-2009, Lamberg has developed a keen sense of where the future of the industry lies. He predicts equipment sales will be more competitive with more specialty product development in the next few years. "There are going to be fewer and fewer customers because of mergers and buyouts, which is going to make the market even more competitive," he said. "We're also going to see more specialty products developed to accommodate specialized markets like the fractionated sand industry, just like we saw with RAP (reclaimed asphalt pavement) a few years ago." Lamberg says from his perspective in the Wisconisn aggregates machinery business, the election results were "a major disappointment," and expressed his concerns about near-term business decline and possible further bank restrictions that will curtail customers' ability to borrow for equipment purchasing. And then there's the uncertainty about federal highway funding. "I really hope that a multiyear federal highway bill gets passed, one that is longer than the current MAP-21," he continued. "It's critical. The extensions put customers in a situation where they can't predict their future, and they're less likely to buy products that are going to last them 10 to 15 years. If we see a four or five-year highway bill passed, we are going to see the customers who have been making a good profit buy more equipment, because they know the money is going to be there. Sooner or later, our politicians are going to have to realize that if they don't do something with the infrastructure in this country, the future of the country isn't going to go anywhere."