Leo Johnson: Dealership Succession Planning & Growth Through Acquisitions

Leo Johnson, former owner of Johnson Tractor and current consultant for the Machinery Advisors Consortium (MAC), discusses the growth and succession planning of his dealership. He shares his experience of acquiring underperforming dealerships in good farming areas and the importance of having capable employees. He discusses the risks involved in growth, the need for strong processes and systems, the significance of developing relationships with both employees and customers, and the role of acquisitions in expanding a dealership. Leo provides insights into what makes a dealership attractive for acquisition and the challenges faced by single-store operations.

While sharing his advice on succession planning and dealership growth, he emphasizes the importance of building bench strength and developing a strong sales department. He also discusses key financial metrics to consider, such as return on sales, debt to equity ratio, and inventory turn. Johnson highlights the need for honesty and transparency in business dealings and the importance of remarketing used equipment effectively, stressing the value of continuous improvement and always preparing the business to be saleable.

Key Takeaways

• Acquiring underperforming dealerships in good farming areas can be a successful growth strategy.
• Developing relationships with employees and customers is essential for success in the dealership business.
• Acquisitions can be a way to expand a dealership, but dealers should carefully evaluate the market and their own capabilities before making a decision.
• Single-store operations can make themselves more attractive for acquisition and ensure a smooth succession plan by being open about their willingness to sell and by building bench strength on the sales team.
• Key financial metrics for dealership acquisition include return on sales, debt to equity ratio, and inventory turn rate.

This episode's guest

Leo Johnson started selling farm equipment at the retail level in 1978 while working for a single store International Harvester dealership in Clinton, WI. After acquiring 50% ownership, Leo grew Johnson Tractor to a five-store complex, exceeding $140MM annual sales with over 100 employees. Johnson Tractor is now a nine-store dealership selling Case IH, Kubota, and New Holland machinery. Leo retired in 2021 and continues to farm approximately 1,000 acres of corn and soybeans in southern Wisconsin. He has been active in industry leadership positions in the local, regional, and national levels and is currently an advisor for Machinery Advisors Consortium.

Chapters

• Introduction and Setting the Stage  00:50
• Leo Johnson's Background and Entry into the Dealership Business  09:21
• Growth through Acquiring Underperforming Dealerships  21:01
• The Importance of Capable Employees and Strong Processes  32:55
• Building Relationships with Employees and Customers 39:59
• Expanding through Acquisitions and Making a Dealership Attractive for Acquisition  46:27
• Monitoring Key Financial Metrics for Success  50:19
• Succession Planning and the Importance of Honesty and Transparency in Business  56:45
• Continuous Improvement and Preparing for Sale  01:06:56

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