Diversification essential for rural dealer survival.

Diversification Essential For Rural Dealer Survival

PERSONS have to look hard, maybe even ask directions, to find The Tractor Place near Knightdale, N.C.

But they won't have trouble finding satisfied customers.

Owner Gary Mize and his son Brian have used an emphasis on meeting customer needs to build a steadily increasing volume of business since incorporating in 1984.

"All we are is a service to our customers," said Mize. "If we consistently have what a customer wants at a fair price, he will become a loyal customer. If not, they will go someplace else.

"We want a customer to come here and not have to go anyplace else."

The emphasis on service has been rewarding.

They sold nearly a tractor a day, more than 300 new and used tractors, in 1989. Business volume was up 22 percent last year after rising 47 percent the year before.

And with Mize projecting a 20 percent to 30 percent annual business increase for at least the next five years, plans are to take on additional lines of equipment to meet increasing customer demands.

The "little business that started behind the house" has already outgrown the 6,000 square foot facility completed only two and a half years ago. Within the year the Mizes will add another 8,000 to 9,000 square feet of parts and shop space--at a time when some equipment dealerships are closing their doors.

Mize gives much of the credit for the success of The Tractor Place to a sound business plan centered on having what customers want.

For instance, he sells new and used equipment as well as new and salvaged parts. He offers repair services on all equipment he sells. And he guarantees all parts, including salvage parts and all used tractors.

"It all works together," Mize said. "I am a dealer for Kubota and Massey Ferguson tractors. But I can get a customer any brand of tractor he wants. I deal in practically any brand of used tractors. Farmers know we can get them the equipment they need right away.

"A farmer will come in here with a bad crank shaft. We can sell him a new or reconditioned crank shaft, or he can trade for a new or used tractor. Fifty percent of the time I'll put his trade-in tractor in salvage and use it for parts.

"One of the ironies of this business," Mize said, "is that our competitors are our customers. Because we are in the salvage business and have the parts, every other dealership is a potential customer. We have developed good relationships with a number of dealerships."

Those relationships also pay off for Mize's customers. If a farmer needs a part that Mize does not have in stock, Mize calls on another dealer and can frequently get the part the next day.

"That's why we have the name The Tractor Place. We are generic. We can get a customer parts for about any equipment. We shop other dealerships for parts and we compare prices. We sell our parts for list price, not 10 percent above list," said Mize.

"Farmers who shop around learn we offer parts at a fair price. More important than that, they learn we can get them the part right away and get them going, or we will trade tractors with them and keep them going. Most of the time we'll have the part in inventory. What we want is happy customers."

That desire to keep customers happy drives Mize to keep a relatively large stock of parts in inventory. He would rather have unsold parts in stock than send a customer away without what he came for.

"If you do enough volume, you are going to sell about any part you have in stock. When we take in a used part, we recondition it and get it ready to go," said Mize.

"If a farmer wants his starter rebuilt, we can do that, or we can sell him a rebuilt starter. We guarantee all our used parts."

And Mize has learned to keep a customer's broken or worn out part when he sells a rebuilt part. At one time, he said, up to half the rebuilt parts he sold were being returned for replacements.

When he began requiring a broken part in exchange for a rebuilt part or charging a core charge when a customer did not have a part to exchange, his parts returns dropped to less than one half of one percent.

Mize also quickly learned the value of keeping current on the value of used tractors.

"We go to sales and auctions to buy used tractors and see what people are willing to pay. Because I've been in the used tractor and salvage business so long, I usually know what a used tractor is worth. I know how much I can offer a farmer who wants to trade on a new or used tractor. We started this business buying and selling used tractors and used tractors still provide the most profit," Mize said.

While most tractor dealers sell trade-in tractors to wholesalers, Mize turns them into profits. He either reconditions trade-ins for resale or uses them for salvage parts. And he buys used tractors at sales, reconditions and sells them.

"I keep two men busy full time in our paint and body shop, doing body work and repainting used tractors. After a little paint and body work it's hard to tell a used tractor from a new one," he said.

"A lot of customers would rather pay $7,500 for a good used tractor than $11,000 for a new one. We give a 30 day warranty on all used tractors. That gives a customer time to find out he has bought a good piece of equipment."

For this system to work, Mize said, it is important for one individual to both buy and sell used tractors. He trades for all new and used tractors himself.

"I have to keep up with what I've got in a tractor, including repairs and what similar tractors are selling for," Mize said. "If I do it right, I can recondition, sell and finance a used tractor and make a lot better profit than I could wholesaling. I can't understand why most dealers insist on wholesaling.

"I sell new tractors so I can get my hands on used tractors. Profit margins are always higher with used equipment. Selling good used equipment with a guarantee helps us keep satisfied customers. When they get ready to buy a new tractor, they come back to us."

Even though he wants to attract and keep loyal customers, Mize has decided to expand slowly, and he has decided to stick with an emphasis on tractors. He normally does not stock tractors over 120 hp, since larger units are seldom purchased by local customers.

"My major tractor sales come from tractors in the 20 hp to 70 hp range. I want to sell what my customers need; what I can sell the most of; and what offers the best profit margin," he said.

Mize's selection of Kubota and Massey franchises were also based on his reading of local markets. He said farmers there are primarily interested in Massey tractors, and landscapers and Saturday farmers were more interested in Kubota.

"I figured both markets, farming and real estate, would probably not be off at the same time," Mize said. "Right now the real estate market is off. But the amazing thing is we are selling Kubota tractors now like we did when real estate was stronger.

"Two or three years from now, when real estate may be super strong again, our volume should jump. We sold 40 new Kubota tractors last year."

Mize has also stayed away from weed trimmers, chainsaws, blowers and other small lawn and garden equipment.

"I don't even like to stock riding mowers," said Mize. "Our best potential for growth and profit is in big name tractors like Kubota, Massey, John Deere, Ford and some others.

"Since we have warranties with our used tractors, we're not interested in off-brand tractors that we might not be able to get parts for. Our customers want dependable equipment that we can keep operating.

"If we stocked the small lawn and garden equipment, every hardware and discount store in town would run ads against us. Since everybody is in the lawn and garden business, the profits are not there."

At the same time, Mize's future expansion will be made with diversity in mind.

"The farm equipment business will eventually be a supermarket type of business," Mize said. "Dealerships will handle multiple franchises and dealerships will be farther and farther apart. We will have to offer equipment and parts for diversified customers. Our goal is to eventually be able to help practically anyone with anything they desire in farm and industrial equipment."

With that goal firmly in mind, Mize is allowing his business to grow without incurring debt. He takes pride in "doing things the old fashioned way," and uses no computers, fancy show rooms or offices.

"Our customers feel comfortable here. They don't like frills, and we don't show any. All of our offices are 10 feet x 10 feet with unpainted plywood walls and no carpet on the floors," he said.

"Many of our customers still remember when we started under a shelter half. We want our customers to always feel a part of our growth. And we don't intend to get into debt to expand. We have paid cash for what we have built and we will pay cash as we expand.

"It takes a ton of money to run a business like this. We don't believe in adding to that burden by paying a lot of interest. We'd rather use that money to maintain an inventory and keep our customers satisfied."

PHOTO : GARY MIZE SOLD more than 300 new and used tractors from his Knightdale, N.C. location in

PHOTO : 1989.