How does a farm equipment dealership make its money?

If you have never owned a dealership, it helps to see it as four small businesses sharing one yard. Each line has its own customers, its own rhythm and its own risks, and the manufacturer sits behind all of them. Understanding the lines separately makes it much easier to read the financial statements later and to ask the seller sensible questions.

Whole goods: new machines

New tractors, combines and implements are the visible part of the business. Sales follow the farming calendar and farm incomes, so they can rise and fall sharply. Ask how the dealer buys its stock, whether the manufacturer helps finance it, and what happens to unsold units at the end of a model year. Also ask how much of the sales effort goes into programs the manufacturer sets.

Used equipment and trade-ins

Nearly every new sale involves a trade-in, so the used lot is part of the same transaction. Taking a trade-in at a fair figure and reselling it well takes judgment. Ask how long used units usually sit, who decides what a trade-in is allowed, and how reconditioning is done and paid for.

Parts and service

Parts counters and service shops often give a dealership its steadier footing, because farmers need repairs whatever the season brings. Ask about technician staffing, how busy the shop is in the off-season, and whether field service trucks are part of the offer. A strong service team is also hard to replace, so find out who the key people are.

The manufacturer relationship

The dealer agreement can set territory, standards, stocking expectations and what happens on a change of owner. Ask to read it early, and have your lawyer review it. Our due diligence guide lists what to ask for next.