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Those that fail to plan…..plan to fail!
Dave Baiocchi
Dave Baiocchi

Back in March, I wrote a column on measurements, and we discussed how important they were especially when treading through difficult times. My April column talked about building the foundation of proper forecasting using a SWOT analysis. This month it’s time to finally set those goals, with a system that includes a specific strategy of how those goals can be accomplished. Using a three-step process to chart the course, can provide answers to the three questions that all of your managers and your employees instinctively want to know:

  • Where are we? (Addressed)
  • Where are we going? (Addressed - SWOT)
  • How are we going to get there? (Action plans and initiatives)

Goal setting and action plans:

I have observed this process in several dealerships including my own. What I find most often is that without a specific and robust SWOT analysis (discussed last month), the process tends to rely on assuming growth of historical data in revenues, expenses and profitability. I call it the old 5% rule. Take last year’s figures and add 5%. This becomes a habit, and in the final analysis, a useless exercise.

Starting with a well-reasoned SWOT analysis will provide a pretty good idea, (or at least an educated guess), as to what the market will hold, and where you can apply your resources and talent. Properly analyzing your opportunities will lead you away from the 5% rule, and toward forecasting based on the activities that are consistent with your SWOT opportunities.  

Back in 1990, I was hired as a new sales manager. I started on January 2nd, and one of my first tasks was to develop a sales forecast for the New Year. Our company president scheduled meetings with all of the salespeople to discuss their forecast. I was not really prepared for what happened next. Salespeople would come in, and we would have a cursory discussion about the customer activity over the past 12 months, and who they thought they might be targeting for the ensuing year. Then the boss asked a single question: “So Bob, how many units are you going to sell this year?” Bob looked at the boss and replied “50?” The boss questioned “50?” Bob replied “OK….60?”

On it went…..salesperson after salesperson, trying to tell the boss what he wanted to hear. After meeting with all of them, the boss asked me what I thought of the forecasting sessions. Being a new sales manager, I had to choose my words carefully, but I had to convey the idea that the process was pretty close to a complete waste of time. The salespeople really had no idea about how they were going to produce the results that the boss shamed them into committing to.  

We had a long discussion about this process, and in the final analysis I shared that when planning and forecasting with salespeople, the focus of the conversation should never start with how many units they were going to sell, or even how much sales revenue they would generate. The most productive way will always start with a discussion about how much money they wanted to make.  Commissions are the chief motivational tool in the engagement of salespeople.  Once we established what kind of annual income they wanted to forecast, they were fully involved in the process of “working the math backwards” to establish how many machines, or service dollars had to be generated to meet that objective. Using an income driven matrix is the start of having a productive discussion with salespeople about their sales mix, the effect of profit margins on their goals, and most importantly what the corporate SWOT analysis uncovered about the areas the dealership wants to focus on, and invest in.

It is my considered opinion that every salesperson should submit their own SWOT analysis for their territory. This helps to focus the discussion on individual action plans, campaigns and initiatives. Use your historical sales only to help you chart quarterly sales trending so that you can break up that annual sales figure into manageable quarterly pieces. Once quarterly targets are in place, simply divide all quarterly goals into 13 equal pieces. Why? Because there are 13 weeks in every quarter! Nobody can reasonably predict what will happen over an entire year. They can however wrap their brain around a plan that charts out the next 13 weeks. 

I created a proprietary Excel based matrix that I use in my training sessions to allow salespeople to custom design their forecasting plan. All of the goals on the sheet are driven by a few simple entries.

For machines sales

  • Annual income goal
  • Percentage of new vs used equipment
  • Percentage of total annual sales by quarter (four quarters must equal 100%)
  • Percentage of total annual sales by product type
  • Estimated average profit margin
  • Estimated spiffs and bonuses

For aftermarket

  • Annual income goal
  • Percentage of parts and service vs allied sales
  • Percentage of total annual sales by quarter (four quarters must equal 100%)
  • Percentage of total annual sales by product type (PM, contract maintenance, P/S revenue)
  • Estimated average profit margin
  • Estimated spiffs and bonuses

All of these parameters could be adjusted by the salesperson to meet their individual action plan. 

On top of the compensation based forecast, I also advise adding a target account selection process. This process should include a quarterly contact calendar that provides target contact planning on a quarter-by-quarter basis. The sales managers have to enforce this activity. 

If you are rigorous about salespeople posting weekly itineraries, and reviewing weekly progress and forward planning, you will find that most of the salespeople will meet or exceed their goals.  First however, they have to set those goals, and do so in a way where they are personally connected to them.  

The final step is constraining the salespeople to chart their progress.  The 13-week matrix is the tool that I use to have them do this. There is no more powerful tool for your people than for them to know where they stand, and whether they are ahead of the curve….or behind it.

Once all of this is done, it is very important for service managers to do some calculations to make sure that they have the resources (especially manpower) in place to support the business plan. If the forecasts determine that the target is a $225,000 increase in annual retail service revenue, then the department has to either have the billable hourly capacity available to absorb that increase, or they have to add personnel. Resource planning is necessary, and understanding the component pieces that lead us to these decisions is important. Successful service departments use math to make these decisions, not gut feelings or historical precedent.

The components of the equation include the following:

  • Determining your total available hours per technician. These are hours that are available for customer billing. After accounting for vacations, sick time, holidays and training, there are a total of between 1850 -1880 actual billing hours in a year per full time technician.
  • Determining your effective billing rate. This is not your published rate! This is your actual average retail billing rate including PM’s, discounted rates, internal billing (rental and sales dept.) and travel time. Think of it as total revenues divided by total hours billed.
  • Determining billing efficiency. This is the calculation that compares hours billed, to hours paid. It’s not reasonable to expect that we can have 100% billing efficiency. There will always be time that must be paid, that cannot be ascribed to customer work. This unbilled time is usually reflected as a direct expense. This can include shop cleaning, truck washing, building maintenance, yard duties, gratis and policy adjustment.
  • Determine your forecast confidence. This is a mechanism for the service manager to exercise discretion and input into the resource planning process. I like to think that every income-based forecast has a 100% probability of success. Not every service manager will agree, so I allow a subjective percentage to be applied to the process in order to account for any uncertainty that may exist. Remember that this number may be lower or higher than 100%.

Using these four parameters, we can now do some math that will lead us to a fact-based decision about manpower.    

  • Forecast: Increase of $225,000 in total annual retail service revenues.
  • Forecast confidence: 90%
  • Effective billing rate: $100
  • Billing efficiency: 92%
  • Total annual available hours per technician: 1850


  • $225,000 x 90% = $202,500 net forecast increase in retail revenues
  • $202,500 divided by $100 effective billing rate = 2025 hours
  • 2025 hours x 92% billing efficiency = 1863 hours
  • 1863 hours divided by total available hours of 1850 = 1.007
  • Men needed = 1

The obvious question is what to do when this number is only 0.5?  This is where you have to produce an increase in your billing efficiency, or a judicious use of overtime to even the scales.  If you need half a technician, but your efficiency rate is only 78%, then you need to use the available billing capacity already in place, before adding additional staff.

I hope this three-part series has helped you in charting your way forward. 

Ready, aim, FIRE!!

Dave Baiocchi is the president of Resonant Dealer Services LLC.  He has spent 33 years in the equipment business as a sales manager, aftermarket director and dealer principal.  Dave now consults with dealerships nationwide to establish and enhance best practices, especially in the area of aftermarket development and performance.  E-mail to contact Dave.