Transformational Change and Continuous Improvement in Construction Equipment

In this podcast episode, we’re joined by Brett Davis – CEO of North American Equipment Dealers Association (NAEDA). Brett has a wealth of experience as a leader within the construction equipment market, leading top line revenue growth at one of the largest equipment manufacturers globally. 

Throughout the episode, some of the key areas we discuss include:

• NAEDA’s role as a dealer advocate and adding value for members
• Continuous improvement versus radical change
• Successful traits of an effective leader
• Opportunities to increase profitability for dealerships
• Transformational change and navigating change in a mature industry
• Accelerating business growth in construction equipment
• Modernising dealership operations
• The importance of having the right people in the right roles
• The role of private equity in a dealership growth

If you’re keen to discuss podcast insights in more detail, please get in touch with Adam Raybould. Alternatively, if you’d like to join us as a guest on Conversations with CSG, to share market insights or tell your career journey story - please get in touch with our marketing team – csgmarketing@csgtalent.com 

Full Transcript Below:

Adam Raybould: Brett, how are things?

Brett: Great. How are you, Adam?

Adam Raybould: Yeah, very good. It's been a while since we caught up. I thought we could talk a little bit about your new roles, your new role, talk about what you've done previously, leadership, all of that sort of fun stuff, talk a little bit about the market and kind of go from there if that sounds good. Fantastic. I think one of the things that I think people would be really interested in is obviously you had an extremely successful career within CNH. You've moved into running a dealership for FMI, moved into this new position running the North American Dealers Association. What I'd like to know is a bit of an insight into some of the ways you worked as an executive, some of the key traits you've possessed and needed to really achieve what you've achieved, Brett, if that makes sense.

Brett: Yeah, you know, I pride myself on leadership. I pride myself on being very open-minded. And when it comes to new ideas, I try to take in new ideas. I really encourage my teams to work together with or without me and really form that bond. And I like to see ideas bubble up from the bottom. And I always, jokingly say that if I have to make the decisions, we're probably in trouble. I like to be able to guide the ship, but I like the team to really develop the strategies and the plan. And then I can sort of modify, refine where necessary, give my input. But it has to come from the bottom up. I don't believe in a top-down approach because usually that's heavy-handed. And usually it's not as well informed. I don't know a lot of the details. I like my teams to be very independent. I feel like I'm there to help them, guide them. But I'm not going to stand over them and micromanage them. And the other thing I would always tell them, if that's the case, I probably have the wrong employee. I'm also very metric-driven. I like simple dashboards. I like simplicity in general. I try to keep things not very complicated. I find that if we over-complicate things, they just don't happen, you know, so really some core focus.

Adam Raybould: That's a point. I was going to say as well, in terms of the way what you've just mentioned as well, it sounds like a lot of it is about having the right people in the right place and having the right sort of people involved with the business and everybody knows their role but you actually listen to what they're saying and form strategies based on what you're hearing from people involved in the day-to-day if that's correct.

Brett: Yes, 100%.

Adam Raybould: And what sort of challenges have you faced with that sort of approach just out of interest? How difficult is it do you think to find the right talent and get the people in the right places and make sure people are, if you've got somebody really performing and you know they're capable of leading, say for example, parts of service but they're in the wrong seat, how have you managed to kind of shift people around and make things work if that makes sense?

Brett: Yeah, that's, well, some people can grow into certain things. They need time, they need coaching, they need development. I've always been willing to invest in people that are willing and able learners. I fancy myself as a teacher, as a younger professional, taught in a couple of universities locally. And I truly enjoyed it. So I always fancy myself, someone that can help teach people. I don't have a problem if they're perhaps not a hundred percent prepared for the role they're going to take, but the willingness to learn and open the mind and accept the challenge I think is more important to me. That's that intangible that I really look for in people. The things that you would value the most, adaptability to change. And I never would believe in change for change's sake, but I need people that are willing to question or look at a current situation and say, hmm, can we make that situation better? Or can we adapt to this? Or can we adapt to that? And goes across the board for a multitude of different functions.

Adam Raybould: Of course, what do you think some of the main challenges you had in that sort of role were, when you were running that large corporate company, you were obviously very successful, but what were some of the key challenges that you faced and how did you overcome them and what did you do to make change, in an industry where it is difficult to effect change on occasion?

Brett: Well, it's a very fair statement because you're in a mature industry, in a mature company that's been around for well over 100 years. You had a lot of long-time employees, which is great because they bring certain knowledge. And at the same time, you have to make sure that we don't get stale. We don't keep repeating ourselves and doing the same thing over and over. So when I come into a situation or a role, I don't try to make radical change. I really don't think that, you know, sometimes the organization will just crumble underneath you. But I bring a model of what I call continuous improvement, which means let's do a couple little things every day, every week, every month, and then we just keep building upon that. And I even try to live my life like that as a professional. It's like, I think to myself every morning, what little thing can I do better today to make us better, to make the team better, to make the company better, to perform better. So I do believe in that. I always tell the team too, it's very important to me that we can test and challenge things. We are going to make mistakes and that's okay as long as we recognize the mistakes and we're not ego driven to see those mistakes through at all costs. And then we can pivot and typically it's just a minor pivot. It's usually not a major pivot. I very rarely have seen situations where we've made a mistake that has been grave because usually we catch it. I call that intellectual honesty. So being able to just to say, yeah, this isn't working. We have to turn a little bit to the right or a little bit to the left to make this work. So that's the kind of freedom I like to give the team. And, you know, I try to find people that embrace that attitude that I'm not afraid to make a mistake. If I do, I own it. I learn from it and we move on.

Adam Raybould: 100% and it's really interesting talking about change because I think one of the most difficult things at some larger organizations is to effect change when they're not in that change mindset and they've been doing something in a certain way for a long time. One of the things specific about construction equipment is sometimes it can be a little bit archaic in its approach as an industry. So one of the things I was going to ask you is when you've come up against that sort of archetypal approach and people saying we've done it this way, we're not really gonna change anything. How have you kind of pushed those decisions and made that effective change without upsetting people who are used to doing it a certain way?

Brett: Well, sometimes you can never avoid some conflict, so it's unavoidable. Then you just have to go through, conflict resolution. I've met a couple of the projects, big projects that I worked on, actually brought change management principles in and people just to focus on change management to get there, make sure we get the buy-in because it's not, you're right. It's not easy. And then some people will just never buy in. And ultimately they become the outliers in the organization and perhaps they end up moving on to something else. But for the most part, making that effort working to effectuate change management communication is so critical. And again, sometimes you can't overwhelm an institution that is an institution. Because then people just freeze up and then you can't get it done at times. Depending on the situation and the cultures and the demographic of the workforce, sometimes you can get away with some more radical change in a shorter period of time. Perhaps just because that's the demographic of the people there. I found that when I worked in Brazil, the demographic was a much younger workforce, less time in service for the company. It was actually easier for them to embrace a new vision quicker than some of the other areas around the world that I worked in, whether it be Europe or North America.

Adam Raybould: That's very interesting. It kind of leads me on to my next question really well. Obviously the dealership model and the dealership market, it's changing constantly, it's evolving constantly. There's lots of different approaches from different dealers. It's a very exciting space at the moment. There's a lot of change happening, a lot of acquisitions happening. So give me an inkling into your current position. Give me an idea of what your focus is going to be in the short term and your approach to the organization and we'll go more in depth around your role and what you're going to try and do with that organization if that sounds good.

Brett: Well, the foundation of the organization is really good. The mission of the organization is fantastic. Our NAEDA is, they're true dealer advocates. We have a hotline. You know, we provide legal support. We have a lawyer that's on call. We offer so many things and we provide so much support, coaching dealers, training dealers, whatever the case may be. So, with that foundation, you have a good thing to just add onto it. And I just want to build that out to be quite frank with you. There's little things that I've uncovered throughout my career, whether that was at CNH or when I was consulting more that I was sharing with dealers. And I'll give you an example. Like I saw a lot of manual non-value added processes in all my roles. And I see them, I see some here. So sometimes, I'm an outsider coming into the NAEDA. And I think the board chose an outsider for the very reason that they felt that, the foundation is really strong, but it's time now to amp it up and modernize it a little bit. And it's not that I'm a young whippersnapper that, you know, knows all this tech stuff for sure. But I do try to keep abreast. I learn, I watch, I listen, I read, I study, and I stumble upon things sometimes. So, I asked if we had a travel management system. This is something very simple. And they said, no. And I said, well, they have apps for that. And, you know, they don't cost anything hardly. And they're like, really? And everybody was so excited because they're like, how do we do it? You have to put it in Excel and send the spreadsheet and it gets manually entered into the accounting system. And I said, how about if I can fix that in a week? And they're like, really? I stumbled upon a couple of different, and then we had a board meeting and I was telling some of the board members, do you have a track? And this is some, we have some big dealers. I mean like billion dollar dealers. There's plenty of, do you have a travel management system that will give you an ROI of 15%, 20% and automate manual processes? And they're like, does it cost anything really? I said, no. And they're like, no, we don't have anything. So that really made me feel good. I said, we're going to use this company. Why don't you try them? Then I'm going to talk to, actually, after this call, I'm talking to them again. Now hopefully, they're going to become a partner. I'll pass that what we learned onto the dealer network, anything I can do or we can do to make dealers better, to add more value to the members is so important. So that's what I'm going to do. Like I said, the foundation is so solid. Now it's just taking everything else and adding it on and giving dealer more tools to be more efficient, to have better sales processes, information security. Is something dear to my heart, and there has been hacks and as you know, Adam, dealers are not locked down in the off-road space. And car dealers have been locked down for years in North America. I don't know the European market, but they've been locked down for years, but not equipment dealers. So I'm really very passionate about that. Making sure because it is quite embarrassing if you have a breach and you have to tell all your customers. So that's another area. Whatever I can do to help dealers be better, make more money, be more efficient, generate more cash, be the conduit between the dealer and the manufacturer, that's what we do really. And it's not confrontational. It shouldn't be confrontational, I hope. It should be more of a working relationship where we can bring both parties together to make sure there's fair dealings on both sides.

Adam Raybould: 100% and one thing I find really interesting is you've had a really, you know, you've had a really varied career at a senior level, you know, working for a large OEM, working in finance, working as a president of a dealership. So you actually have the rare ability of being able to understand what an OEM wants, what a dealership wants. You also have the ability to understand the financials in terms of, when somebody's doing M&A, when somebody's looking to expand, when somebody's looking to contract. And I feel like with all those different skill sets, essentially what we're trying to do and you're trying to do is build a platform where you can pass on your skill set into that platform and kind of bring dealers together and say, look, if you need a one-stop shop to understand how you can conduct M&A, how you can acquire businesses, how you can collaborate with each other, information technology, all these sorts of things, you've kind of done a lot of that. It's a really good platform for a dealer to come and join and say, actually, we're going to jump in because we need help with this. And they have other dealers in similar situations and somebody like yourself to lean on. Do you think that you're going to implement a lot of your ideas and your experience into that platform, Brett?

Brett: I think I'll be a part of it. And like I said, I think we do a lot of those things that you mentioned already. It's just expanding that. In a corporation, in a public company, you talk about creating shareholder value. Well, in my role, we set the goal for the team to create membership value. So the more value-added things we can deliver as a team to our dealers, the better our organization would be because we are dealer advocates. We're here to serve dealers, period. And make sure that they are well represented, whether it's with the OEM or it's within the state legislature or at the federal level as well. That's what it's all about. So whatever I can do, and again, I've touched a lot of things, but I don't know a lot of things. I like to think that we can find the answers and find the partners to help provide the solutions because there's no way that we can do it on our own. We don't have those skill sets. We do have an accounting firm underneath the umbrella of NAEDA. They do valuations. We do have a dealer institute. So we do have different things under there. And it's just a matter adding on those. And we have partners that do different things. We have a partner that does benefits and remote HR work. We have a partner that does insurance. And finding different associate members to offer more value to our members is really important to me. That's what the first few weeks I've been doing a lot of that with some of the partners that I have worked with in the past and I have complete confidence in and bringing them to NAEDA so that they can offer value to the membership.

Adam Raybould: It's interesting when you talk about that. So with NAEDA, give me a good example of how you get these dealerships to collaborate and the best forms of collaboration that you can drive. Because NAEDA is all about collaboration from yourself with the dealers, you helping them, helping them to understand challenges, but it's also about them sharing ideas through forums. So talk about some of the events that NAEDA holds and how they add a lot of value to the dealers.

Brett: Yeah, we'll do webinars and training sessions on timely topics. We could do one on securing talent, how to best secure talent, which is right up your alley, or how to protect your dealership from cyber threats. A lot of these things will be breakout sessions at our national convention on these things. And then if someone has an individual problem, like I said, we have hotlines and we handle individual emails and calls. And I'm seeing those come in. It's really enjoyable for me, solving a problem, for helping to solve a problem with the team for a dealer in a pretty short period of time. It's actually very fun. But yeah, I mean, there's training materials. There are some OEMs that have hired us to train their dealers, to be better dealers, to be better sales, better sales processes. So that's interesting too. We're not an OEM association, but we're not necessarily adversarial. One of the interesting things, and I had been involved with this at CNH as well, NAEDA will be a conduit with the dealer contracts. So they can sit between the dealer body as a whole and the OEM. And instead of the OEM having to try to deal with dealer counsel or individual dealers, they'll send us the contract. We'll work through it with our lawyers and then the OEM lawyers get it finalized for lack of a better term, bless it. And then the dealers have a comfort that it has been reviewed and it meets appropriate standards and fair dealings and it's a fair contract for both sides and the only good contracts in this world are fair contracts and it works for everybody and it makes it a little bit easier for the OEM because otherwise they're sitting there begging these dealers are taking it to the individual lawyers. And so it's a value-added service for kind of both, even though we're really representing the dealers as an entire body. And I remember talking to the board before I started in the hiring process and I mentioned that at CNH and they're like, yeah, said, everybody is like, yeah, but it was so much easier because otherwise I would have had to beg probably 30% of the dealers to sign the contract or they said, I'm not signing this and we would have no contract. The NAEDA blesses the contract and says it's been negotiated, it's fair, they'll sign it and you move forward. And it saves everybody a lot of time in the long run and a lot of headache too.

Adam Raybould: It's really interesting hearing you talk about this because I think one of the major challenges right now for dealers as a whole when we talk to them and some of the biggest dealers out there is their relationships with OEMs because dealerships at the moment are, a lot of them are, like we've talked about, for acquisitions, driving to sort of grow turnover. Whereas the OEMs are going through a period of little bit of uncertainty around some of the tariffs. And I think one thing I'd like to get your ideas on is, what do you think dealers need to do in general to better collaborate with OEMs in terms of relationships? Because it's a very tough one because some OEMs are easier to work with than others, but also in some cases, it can be about the dealer and the OEM having a sort of go-between in an in-between space to meet on, what would you say to a dealer if they were talking to you about their relationship with an OEM? How would you share best practice in that sense?

Brett: Yeah. Well, I'll tell you this. There's OEMs and there's OEMs too. So your full line major OEMs, whether there's five, six, seven, right? The relationship between those OEMs and the dealers, every once in a while it can get contentious, but it works. They need each other to be successful. They're all successful. It's a partnership. I always call it a symbiotic relationship. They have to have each other to make it work. Typically OEMs do not, and probably should not get in the distribution business. Sometimes they have to out of no choice, but it usually is never good. It creates accounting issues, revenue recognition stuff. It's just, OEMs are good at building stuff, engineering stuff, distributing stuff to the dealers. The dealers own that relationship with the end user and stitch themselves to that. So with the majors, there's little things here and there. What I do see is the second tier of OEMs, call them what you will. Some of them are semi full liners or short lines. A lot of non-North American companies that are building some of this really cool, automated equipment aren't quite as well prepared to step into the North American market as they should. And I noticed that and I think that I learned that. I had not experienced that because coming from CNH, like I said, the majors aren't really going to be the issue. They're going to comply with state laws. They're going to comply with industry standards in general, whether it's a buyback law, warranty, reimbursement parts stuff, parts returns, they do all that. But a lot of the smaller OEMs do not understand that and haven't taken the time or found the resources. So I'm thinking, geez, we can be that conduit and help them before they make a mistake in entering the market in North America, one, can help them find dealers. We can send out, hey, this one's looking for dealers. You should talk to them. We can help them set up the proper contract so they don't have to, they don't take a different view of it from a perhaps a European look at the contract, because that's not going to work in North America and vice versa. So sort of being that conduit to help them at the same time give our dealers access to some of this really cool equipment that's coming out, a lot of these smaller OEMs that are making specialty stuff that complement the main lines. So I think there's great opportunity there for us to do more. And again, I learned that I was shocked to learn about this whole underserved segment when I was at the FMI, because we were essentially a short line dealer. And I just assumed everybody did things the same way. And I was very wrong. And so I'm very passionate about that. And I've reached out, you know, I have friends that are OEMs across the world and, know, hey, and a couple of them reached out to me, hey, Brett, how do we get into the North American market? Well, why don't you let us help you? We'll help you. We'll introduce you to dealers, come to our convention. But first, before we go too far, are you willing to, to do things the right way under North American standards? And they're like, yes, why wouldn't we? And I said, but that's not true for everybody. So that's important to me. I will not promote you unless you are absolutely compliant with all practices in North America.

Adam Raybould: I find that very interesting and I find that as a big key point to NAEDA as an organization as well because I think one of the key things for me is, even in my role hiring people for a multitude of OEMs, dealers, you do see companies underprepared for North America. I think it's good to have somebody like yourself that has the experience of dealing with an international OEM and also working with a dealer to understand actually do you have the right approach to the market? You're part of the association, you can actually come in and talk with dealers who could be potential customers, but also you can see how they operate. You can understand what their expectations are. Because a lot of it is, you'll get a lot of companies that say, we're really successful in our niche market in this area of Europe or this area of China or this area of Southeast Asia or wherever it might be. They come to America and then it's very difficult for them to sort of translate that success to the North American market and having something like the platform to go to a load of dealers and say, actually, what would you want to see from us? How would you like us to collaborate with you? What would you expect to see from them agreement perspective? And I think that's a real selling point to what you're doing. Because I think it's not just the fact that the dealers come and talk to each other. You have some great networking events. It's the fact that if you're an OEM, it still makes a lot of sense. And I find that really interesting. And one other question I've got for you is, we're working really extensively with private equity, growing dealerships, trying to acquire dealerships, put them together to create so-called super dealers. You know, I know that sounds a bit silly, but that's kind of the easiest way of putting it. But one of the things I was going to ask you is, from your experience in finance and your experience as a leader,

Brett: No, it's not silly Adam, but uber uber dealers.

Adam Raybould: How would you go about taking over a dealership? I know it's quite a big subject, but acquiring a dealership and building a solid dealer model that will be successful, but also will allow you to grow it exponentially, what would be your building blocks of that?

Brett: Yeah, I mean, you know, the private equity is just another form of funding, right? And to help with consolidation, which is ongoing. I don't believe one size fits all. I mean, different markets call for different things. There's still a place for small dealers in certain markets. And in other markets, there's probably needed consolidation just because of the size of the equipment in the trade area. So and private equity are going to play a critical role in that. The key for private equity is, and you hear this all the time, if you get a call from someone, we have money to deploy, but we don't have any skill in house or knowledge of who can help us set up the operations and the management team. Where can we get a management team? And I think that's the biggest challenge that, you and they should be asking that question. They absolutely, I mean, they should, before anybody invests money, they need to have this managed. So, in some cases, you know, there could be a management team in place that is exceptional. I've seen that in a couple of deals where I seen it in Western Canada where a very well-funded, more of a family office than private equity, but still, similar. And the management team at the dealership was so strong and they left everything in place and they just bought out the, the original owners. It worked perfectly and they didn't miss a beat and the private equity guys basically, sit on the sidelines because you have such a strong management team. Where it's not the case? Usually doesn't end up well where the management team isn't strong enough and the money comes in and it usually does not end well. So I mean to me that's the critical finding it's all about people. Finding the right people to run those and that's where firms like CSG come to play. I mean you you've got to bring the management team. And that skill set isn't all over the place. You don't go outside and walk down the street and find those skill sets. It's hard. I embrace the money that comes in from private equity. It serves a great purpose. Finding that management team is usually the barrier to success. If have it, you're probably going to have success. If not, you're not.

Adam Raybould: Really interesting because I think we've seen that ourselves from if you have a desire to grow a billion dollar dealership or you have a desire to have a 500 million or even a hundred million dollar dealership I think sometimes one of the challenges that these private equity firms face is they come in they'll acquire something but they want to sort of turn it around quite quickly sell it on or get hold of something build it and then try and sell it in a three to five year period. And I think OEMs are much more keen on businesses, private equity, picking up one of their dealerships, being passionate about it, growing it, holding onto it, and reaping the rewards of that. Because I think, to be honest, Brett, one of the biggest challenges with construction equipment compared to other markets is the amount of investment it takes to get somewhere, if that makes sense. The amount of investment it takes to grow a team, have the equipment, have the locations and the amount of patience it takes. So in terms of that sort of thing, what do you think are the core focuses for a company when they're acquiring a business? How does a company appeal to an OEM from a private equity standpoint? Because I think that's something that a lot of them have a challenge with at the moment.

Brett: So, there was a Case IH dealer in Wisconsin, Johnson Implement, family business, still a family business, was passed on. He does consulting now. And he wrote an article last year, I think it was, and he talked about, and I thought it was very simple, but very accurate. And he went from one store to go from one store to two stores, not such a big deal. Two to four, manageable. Going four to eight, starts to get complicated. And then it levels off because you have to then set up some sort of corporate structure to manage X number of locations. And if you're eight stores doing 15, $20 million, you're now over $100 million business. That's a real business. That's a sizable business now. And it has to have a corporate structure to it. And a lot of the family businesses with that transgression, that movement, it's a struggle because they can still run it as a real true family business with one or two or three stores probably. And, as they get beyond that, you know, they need to put some guard rails in place. They need to have structure. They need to have a proper HR. They need to have this. They need to have that. They need to have, a centralized parts ordering system. There's so many things that have to happen because letting each store order their own parts is really not going to be particularly efficient. You might even need a warehouse to store parts. So all these things start to come into play. You know, into one or two stores. Yeah, I can go over to the service shop, hang out in the service shop, making sure everybody's being extremely efficient, check the warranty claims, make sure they're being submitted properly. So we'll get reimbursed properly. I can check on the reimburse. But again, once you get to that eight stores, boy, now you need a person overseeing that process. You have to bring someone in to oversee all eight stores. That is a huge transition for people. And it complicates matters. And so a lot of the bandwidth of the family, the original family store operators becomes too stretched. And I think some of your best dealerships will recognize that the owners, and have some humility and they'll hire professional CEOs to come in and run it. They'll have a family board but I'm seeing more and more of that. In other cases, I've seen some family businesses grow they've sent the heir out to do something different, work in a corporate environment, learn and then come back to the family business. You see some of that as well which is really a great practice. So they just don't know one thing. They grew up, I grew up in the dealership so I know I can run a big dealership now. It doesn't always work that way. Sometimes you need to see other things and learn other things. So I think it's, that's, I thought that article was very, it resonates with me. Let's put it that way because it's very true.

Adam Raybould: It's really interesting listening to you because you've obviously got so much knowledge of the market, so much experience of seeing successful businesses and seeing dealerships grow. I think one of the key points you mentioned is yes, if you want to be successful as a dealer, you need to make sure that if you are growing and if you have a dealership and it is family owned or it is, you've just been purchased by private equity or you have a desire to really grow. It's a very competitive market right now in terms of people because these senior leaders, they have more than one opportunity. And it's the dealerships that are moving extremely quickly. It's the private equity companies that are moving extremely quickly. We've seen a lot of finance professionals, CFOs, because they have an opportunity they know how to grow a business financially, but it's also getting that right leader in place at the right time when you're going to accelerate growth and you know I think what you need in any job or specifically within a dealership is a growth mentality and how you go about that. One of the really key questions I would have for you Brett is when you see companies or dealerships that are larger and they're trying to acquire businesses and knit those businesses into their current organization. What do you think some of the challenges that come from that and how does NAEDA support that transition and help dealers to really get their head around it and provide maximum value to them in terms of that?

Brett: Yeah. So yeah, is probably one of the most interesting pieces of it all because you you'll have a, let's just take an example, a complex of 10 and in their footprint comes for sale, a complex, a single successful single store run by owner operators. They buy it. There's a certain culture at that single store operator that is going to be different, completely different from that 10 store more corporate culture. So, and that's a lot of friction. There's usually a lot of friction. So, usually the owners will, sometimes the owners stick around for a period of time to help with the transition. Sometimes they don't. They just, ride off to the sunset. But it requires a lot of patience and a lot of time and a lot of handholding and a lot of getting back to change management to be able to make sure that that dealer comes to be the 11th store of the complex and not 10 plus one outlier. And that it's hard because the people are used to imagine. I mean, my dad was a small business owner, so, I see it. It's like a family. Even the employees, many of employees have been there for years. You know, they know each other intimately. Well, a lot of that is going and it's a struggle for a lot of the employees to lose that. You know, the owner used to come by and bring doughnuts to me every day. Well, that may not happen anymore. I've seen owners that have managed with just pure kindness and that's a good thing. That's not a bad thing. But these organizations that are growing won't have policies like that. Oh, you need money because you're short on rent this month. Oh, they reach in their pocket and give them rent money. So that goes away. And unfortunately, or whatever it does goes away because you you can't have that going across a larger business of 10 stores, which could be up to $200 million, perhaps. It's a hard change for a lot of people. The turnover is usually pretty high.

Adam Raybould: Really interesting because I think one of the key ways that you're going to support dealerships looking to go through that journey is what we just talked about obviously your experience but there will be a lot of association members who have been through that journey who've seen those changes who have been through that difficult journey of acquiring a store and folding it into their operations or acquiring a store and going through a difficult transformation and one of the key things you can do is not only have your take on it as the leader but also the take of the other members and said who's saying actually we did this and this worked for us we did this this worked for us and I think that's a really core selling point to for what you're doing as well and I also think one of the things you mentioned right at the start was talking about systems and technologies and it's been an interesting shift because there was a really a key point I think very recently where dealerships looked at things like Telematics software and software in general and there was a big shift towards right. Let's move away from the The big iron and let's focus more on software It really seems because of the changes in the market that companies have little to an extent gone back to what they know. Have you seen that similarly or do you think it's still a major focus moving forward for the industry because obviously OEMs they are focused on technology but it feels like everybody's kind of going back to what they're really strong at in the current market.

Brett: Yeah, I know. I think that the technology pieces will not go away. Machine wise. Yeah, that's on. It's going to become ongoing and ongoing. Where I have some doubts and I don't know if it's so much the construction market, maybe it's more big ag, but there's been a lot of movement towards building flagship, and the price. And loaded up with the technology and the size of the machine, the price is becoming very, very expensive. And then I also see some disruptions in the secondary market that concern me in that where does that's where's that secondary market buyer coming from? Because typically, you they're going to be a little bit more value oriented, but such a, you know, class 11 combine and then being so expensive. Does a person with 5,000 or 3,000 acres need that type of combine? And in the secondary market, so are we going to devalue the secondary market of some of these large combines? They have multiple issues, have portability and things like that, but they're just so expensive. So are we pricing ourselves and some of this stuff? So I think we will see a shift in the market. I think your point is well taken that we do have to probably come back to more of economized machines that are attainable and affordable in some, in some, again, it's not a blanket statement, but there are spots. I think the audio industry goes through this a little bit too. Everybody wants to build a flagship, right? Everybody wants to sell the most expensive car. They loaded up on these very expensive electric cars. Now they're giving them away basically. And they're losing 20, $30,000 and everyone they sell because they put their, and all the buyers rushed out to buy them. Initially because they I got to have this this is the latest and greatest but how many how many of those but now that after all those buyers have bought What's next? They're just not going to keep coming So I think there's some of that in our industry the heavy equipment industry as well So we need to be very conscious of that on the construction side Different than ag there are so many people making the same exact thing that It's difficult for me to differentiate them, to be honest with you.

Adam Raybould: I know exactly what you mean. You look at these products and you say they're all very similar they have kind of slight amendments to them but it's difficult to go well why would you go in that direction as opposed to that direction and what makes it unique I guess whereas with the machine it's very obvious what makes it unique.

Brett: Right. Yeah, I mean there's 20 manufacturers that make skid steers or mini-X's and there's just so many now. So it'll be interesting to see what happens over the next decade in consolidation in the construction space and how that rationalizes. There's just so many people making so many things and there's a few dominant market share players and then there's everybody else, you know, with small market share, single digits probably. So how does that all, it has to shake out at some point because if you're a single digit market share player, how do you keep up with the R and D? I think it's impossible. So it'll be interesting to watch that market. Whereas the ag market is pretty much consolidated. There's still plenty of short lines and whatnot. But the consolidation happened long ago. And there's really only a couple full lines. That's not the case in construction. Between the full lines, the short lines, and everything else, there's just a lot of people making a lot of stuff. And I think the other thing, you know, in the trend is rental. You know, I remember as a young, younger professional listening around the table in the room, people saying, this rental thing, it's growing, but it's not going to grow that continuously grow. Well, 15 years later, it's still growing. It's going to be 60% of the market before we know it. That's changing things as well. Has, you know, that's in construction. That has not even entered even close into ag and will it? I don't know. It gets complicated with ag to be able to do that. But, who knows? You know, the evolution of these business models will be interesting over again, the next decade to see how the impact of increasing rentals, you know, less true sales and then what the OEM's reaction to that will be and what their, their position is going to be.

Adam Raybould: Really interesting to just touch on that actually because in the past rental market was kind of very focused on AWP, scissors, booms, telehandlers, lifting machines because obviously that is a very rental focus model for OEMs as it is because you're using those machines for a specific job but then you might not use them you know to kind of et cetera, cetera. But one thing that we've seen from our side is a lot of dealerships being from major OEMs being given ownership of rental for the first time. And again, a lot of it comes back to people. But one of the questions I would ask you is if you were running a large scale dealer and you of the rental space, what would you do to get the right people in the right places and what would you do to, well not even that really, how would you approach that new market, how would you grow your rental division if it wasn't something that your business already was used to doing?

Brett: Yeah, I mean. It's difficult, the required capital for rental is significant and, that's where a lot of the dealers fall short is they don't have the ability to make that kind of investment in a fleet. With that said, if it was me, I would focus on products that are specialized that really don't have a true rental market developed but are very rentable. And build off of that as your primary and then fill in with the basic stuff that's required around that. Because, you one of the challenge if you're just doing specialty stuff then the question becomes, I'll go get my specialty stuff from you and I'll get my other stuff from somebody else. Maybe that's not a bad thing, maybe because I'm going to get undercut, I can't compete with United Rentals. I can't compete with her or Equipment Share. But they don't see, they don't, invest heavily in those specialty outlier markets. And it requires a lot more touch, a lot more knowledge, more training before the rental customer utilizes that type of equipment. So I think that's where you can make a dent as a dealer. It will lower your investment as well. And at end of the day, if they want to get a skid steer and you don't have one in your rental, you could do it. But if you don't have exactly what they want, they'll go to United. But United won't have that specialty equipment at this point. So focus on what others don't have. Don't try to run yourself ragged trying to compete with the Giants, because it's difficult.

Adam Raybould: Totally, I think that's some really strong feedback and I think if you are going to move into the rental space, one, it's about the right people, but it's also about that approach and not trying to be a United Rentals overnight. One of the other questions I had for you is, looking at the way the industry operates and looking at the things like electrification, things like using hydrogen in machines. When do you think we'll see the industry and dealers specifically really take up the mantle in terms of electrification? Because I've seen a lot of businesses and OEMs producing machines that do operate in that sense, but I think it's more about potentially some of the infrastructure you get on the sites that the machines are used as opposed to the actual machines themselves. When do you think we'll be at the point, just out of curiosity, when we see the industry shift towards more electrification and more sustainable solutions like sustainable fuels etc.?

Brett: Yeah, well, there is some of that already. There is biofuel fuel being deployed. I mean, I could speak to North America, right? And, there are biofuel tractors out there. There's methane tractors out there. The problem is the infrastructure. There's no infrastructure to support it. So the customer or the, you know, the or is going to use it has to create their own infrastructure. Yeah, if you're a giant conglomerate, a big cheese company like a Sargento or something like that, you can probably create that infrastructure and become almost, a fuel efficient operation, or biofuel operation. But if you're not a giant, that infrastructure is going to have to come from the government, whether it be local, federal or otherwise. And so far, there's doesn't seem to be much of an appetite for that. So that's a hold back there. On the electrification, it makes sense on small stuff, indoor stuff, stuff that's going to be used for just a couple hours. I think you'll see municipalities start to adopt a lot of electrification, but there's a but. But the problem is, is they need a full workday and they can't have the downtime of the charge. And they have to have a remote ability to charge them efficiently. That's the feedback I've gotten from folks. They'd love to buy electric, but I need nine hours of work time. If I have to take it down for an hour or two, and if I only get six hours of work time, I lose three hours of work time. It doesn't make sense for me. Then I have to buy two of them, which then is more expensive. It doesn't make sense. So I think as the battery technology continues to improve, there could be more opportunity. With that said, there's another thing that we don't talk about as well. Weight and having too much weight, what damage could that do to land or roads or otherwise? I have an electric pickup truck. It weighs 10,000 pounds. But my battery goes to like 450. So that's good enough for me. I get everywhere I need to get to. I drove it across country. It was not a problem with that kind of range. But it weighs 10,000 pounds and it goes zero to 60 in four seconds.

Adam Raybould: Hahaha. It's really interesting, you know, because some of the things you've mentioned, Brett, has been really akin because, the automotive industry and the construction equipment industry is obviously very, very different, but there are pretty consistent similarities. And so in some areas, construction equipment is way ahead in some areas, it's behind. And I think with construction equipment, there's so many different solutions on the table for how we can make it more sustainable. But I think maybe the electrification being one, one of the really exciting one is sustainable fuels, maybe having a system where you can run machines through a different, through a more sustainable fuel product that's more efficient and more environmentally friendly and hydrogen and all these different elements. It still feels as if we're waiting to see what is the sort of

Brett: Yeah, I would agree. I mean, electric is a starting point. It's not the end point. It's not where we're to end up. It's in terms of sustainability, it's neutral, I guess. I don't know if it's really positive. You need coal to make electricity. So at the end of the day, and then what do you do with these giant batteries? How do they get recycled and things like that? Sustainability in electric is probably better than gas or oil. But nonetheless, it's not certainly imperfect. So probably there'll be some light adoption. Their use cases make perfect sense. No different than a buyer buying an electric car. If you're driving on the highway every single day, hundreds of miles, it's not going to make a lot of sense for you. If you're driving around town, it probably makes a lot of sense for you. So there'll be use cases. There'll be some electric offerings that make sense. Not everything is going to be electrified. No. And by the time the technology in electric improves, like you said, there'll be other stuff. The methane opportunity of recycling waste and things like that, that exists. We just don't have enough biodigesters. I know in Europe you do a lot of that. We deployed some methane tractors in my past life. And so it's just not happening in North America as quickly as it should. No one really talks that much about it at this point. And then we took, you hear about hydrogen, I personally have no clue of how that works. It's way above me, nonetheless. So there'll be new technologies.

Adam Raybould: I didn't know you were coming out of this. I just wanted to kind of bring it back to the area as well and ask you a question around you've obviously got the conference coming up in Orlando.

Brett: Yes, sir.

Adam Raybould: To talk to you a little bit about what that sort of conference entails and the kind of opportunities the members are going to have to kind of collaborate, talk to each other, what they can get from that. And kind of also how important it is for these conferences to let everybody collaborate and have open and honest and transparent forums, if that sounds good.

Brett: Yeah. Well, you know, it's a mix. Obviously, some of the important stuff is networking. We have a lot of educational sessions. We're going to have one of the good sessions. We'll talk a lot about the legislative priorities. That's really important in making sure that our dealers are aware of the key legislative priorities that could impact their business and that they're participating as well and you know, obviously we take the lead. There'll be some, educational. I think there'll be some partners there, vendors, partners that can offer different services that they can explore. I always found going to those conferences, that was one of the most valuable things for me and that's, I'm going to put a greater emphasis on that and bringing in more and more partners that can help dealers be more successful, period. So, you know, whatever the case may be. So it's a good opportunity. I look forward to it. I'm excited about it. And I've always been an attendee. So now I'll be in a different capacity, I guess. I'll probably be doing a lot of talking and hand holding and shaking hands. So I'm looking forward. It should be fun. We hope to see you there, Adam.

Adam Raybould: And, yeah we're gonna get signed up, definitely we'll be over there. And I kind of wanted to ask you on sort of a final note, of, obviously with your career and everything you've achieved, there'll be a lot of people sat there going, you know, I'd like to get to somewhere on that level, one of the things I was going to ask you is, sort of, what's the most valuable piece of advice you've received in your career from a peer or from anywhere? What's the one piece of advice that's really resonated with you?

Brett: It's this, and I just, I say it all the time and I see it happening all the time. Someone said to me once, if in today's world, if you're sitting around a room trying to solve with your team members on your own, some sort of problem or solution, whatever the case may be, keep in mind, you've probably already failed, because somebody else has already figured it out. And it's your job, it's your job to go and find that solution and figure out how to integrate that into your business and become your solution. And I kind of live by that credo, because I see way too many people thinking, you know, they become self-contained and they try and sit around, well, we need to build a new process, a new system, and a new system. And we're going to design it ourselves. Someone's already done it. Someone's already done it. I was talking to an old friend and it was someone that we use and everybody uses. The other day, he founded the Paynet Company which really revolutionized credit scoring in the equipment industry, construction agriculture. And he sold it to Equifax.

Adam Raybould: I absolutely love that. I think that's brilliant.

Brett: And he's starting something new now. We caught up and like I said, I've known him for years. And to be honest with you, I still see people trying to build proprietary scorecards and things like that. But the accuracy of the Paynet stuff was 99% accurate. So why bother building it yourself? Just use theirs.

Adam Raybould: It's like, you don't invent processes, don't invent complex structures if they already exist elsewhere. Implement what you need to implement and listen to the people around you. I think that's great.

Brett: And some of that's ego driven. You've got to check your ego at the door or at the room. You know, oh, I can build this. Can you? Can you do it better than, you? And OEMs are even learning that. Look at all the little acquisitions, not so little some of them. Look at all the acquisitions that are going on. They're buying startups. Know, it's hard even, know, historically an OEM would sit there and say, oh, what's the return on investment? I don't know how you calculate the return on investment at the start. It's not easy. But they're seeing these ideas out of incubators with people that really are well equipped to create these things. And that culture typically does not exist inside a larger manufacturing environment of that incubator approach. And so they're growing out and buying them. And I give them a lot of credit. They're almost like venture capitalists in the work that you're seeing. I mean, think deer has been very active for years. CNH is catching up on that now. So you're seeing a lot, a lot of that. There's a couple tools now that are going to start to be deployed in service departments that are really going to become AI enabled tools. And then they're going to end up being able to quote everything they're going to put in all your records. They're going to put in all the manuals. They're going to basic and then they're going to be able to basically submit warranty claims someday. I mean, we're just scratching the surface now. So I think you'll see again that that's another you're seeing the OEMs looking, looking, looking. And I see a couple of the OEMs trying to build their own. And I'm like, why don't you just buy them or partner? Maybe they don't want to sell, but you just partner. So that's how I try to live my, that's my credo. Let's put it that way. That was the best advice ever.

Adam Raybould: It's really interesting and a really good kind of point to finish on. It's that whole thing of you're going to every company and every business, our business, CE dealerships need to integrate AI, modern processes, information technology into their businesses to be successful. But this as an industry, I think is one of the best examples of an industry that's run on relationships. It's built on relationships. It's driven by it. You can only be successful as a dealership, as an OEM, as a business within construction equipment by being passionate about it but having the right relationships with the right people built on trust and then if you pull that with the right technology systems the right use of AI that's when you can really drive some core success and I look I really it's always a pleasure catching up with you I really appreciate it. I know you're a busy man so thank you.

Brett: Yep, absolutely. Adam, can't wait to share a beer with you in November. Well, we'll each have our own beer. We won't share one. All right, have a great weekend. Thanks. Bye bye.

Adam Raybould: 100% good to clarify fantastic really good to chat thanks a lot cheers.