In the September issue, we typically cover the latest developments in finance, rental, and leasing, providing input that dealers can use to modify their systems and procedures, ultimately leading to higher profits and increased cash flow.

To accomplish meaningful results, you dig into industry data sources, talk to bankers, and put together comparative data year-to-year, explanations of why results shifted, and if you are lucky, compile estimates about the future 12 months at a minimum.

This year, however, it appears that every avenue regarding equipment, interest rates, unit costs, customer requirements, rental activity, technology, new tax bills, and almost everything you look at is in a state of flux, meaning that any short-term analysis is probably going to be tough to work with because assumptions used could change at any time.

Let’s start with a brief review of the industry, and then we’ll move on to the more significant changes you will need to address.

If you recall, my previous series of articles focused on performance gaps and potential changes a dealer may encounter, which, if left unaddressed, would reduce the value of their investment. However, as I prepared this article, I realized that the five-year timeframe for AI and technology we have been hearing about will soon be upon us, requiring a decision to be made.

Short-term decisions require a conservative approach to business planning. Dealers may also want to consider bringing in outsiders to help contemplate their personal technological literacy and access to expertise. This same method should be applied to risk management and prioritizing technology investments. Obtaining input from peer groups and OEMs is also essential.

The most significant change will be in the metrics used to compare your statements with those of the standard industry results. For many of you, current metrics will no longer be comparable against your “new “numbers. This was one of the reasons I covered Free Cash Flow in a recent column: to determine how much free cash you have available for growth and technology.

This conservative approach will impact both dealers and customers. Consequently, purchases of equipment will be kept to a minimum, with units in use receiving more attention from customers. Interest rates will lead customers to avoid higher-priced units, instead opting for rental or refurbished units that are available for purchase.

Taking a conservative approach to the balance sheet is also essential. Clean up the AR, review the parts inventory, and eliminate slow-moving items. The same applies to used units with low time utilization. New unit purchases should be kept to a minimum until we get a better understanding of the market. You may also need capital for new types of inventory. Continue this review with your rental fleets to keep them available when needed. Also consider what units would be refurbished for sale. Squeeze as much capital out of the balance sheet that you can.

The income statement line items should also be reviewed to see what can be eliminated and when.

After completing these reviews and adjusting, you will have a much better story to take to the bank in support of additional capital needs

Now let’s get to the potential change that will change the way you do business and, as a result, change the metrics from what they were to what they are after making both product and technological changes.

What is going to change?

• AI development
• Technology
• ROBOTS

Believe it or not, you will be in the ROBOT business because manufacturing and warehouse customers are going to demand it. Because China has built the most automated manufacturing empire in human history. Producing products faster and cheaper than anyone thought possible.

China installed 276,000 industrial robots in 2023- more than half of all robots deployed worldwide that year. In 2021, more industrial robots were produced than ever before; China also produces 50% of the industrial robots it installs. And now they are starting to build robots themselves. And once they perfect this cycle of robots building better robots, US companies become permanent customers of Chinese factories.

US companies are demanding a national robotics strategy. Every single factory or warehouse being built will be more automated than anything the US has ever built. Let’s face it, labor costs make traditional manufacturing uncompetitive. To beat China at this game, we need to out-automate them. Steal the robot jobs from China and use our robots to produce goods and services in the US.

What is great about this is that your services and some products are what these manufacturers and distribution companies need to transition to full automation using robots. You sell, rent, maintain, and assist with the construction or rehabilitation process to modify an existing facility.

Material Handling dealers should take steps to access robots, technology, and AI expertise to make it available to their customers. At the same time, they should have an arrangement with service providers to refer new customers they encounter.

Now you understand, based on the “state of flux” comment I made earlier, as well as my earlier comment about the performance gap. Most dealers will be entering a new business with fewer personnel, lower prices, and fewer inventory units because of the AI/Technology opportunity.

I also want to mention that Steve Pierson, CPA, and dealer tax expert, is available if you have questions about the new tax bill. Jim Margner, CPA, is the state and local tax expert who may be impacted by the new tax bill.

If enough people are interested, we can set up a podcast to discuss the tax bill in more detail. Please let Dean know if you are interested. His email is dmillius@MHwmag.com.

BDO sent me their summary of the tax bill, which I sent to Dean. Let him know if you need a copy.

Last comment. Where do you fit into this new business environment? Where does your product fit in going forward? I suspect that there will be a few M&A deals available for dealers who are not willing to make the switch to this new technology environment.

About the Columnist:

Garry Bartecki is a CPA and MBA with GB Financial Services LLC, and a Wholesaler columnist since August 1993.  E-mail editorial@mhwmag.com to contact Garry.