Financial Guideposts Signal the Road to Success or Failure

Dealers who keep their attention on profits only won't know what to look for as their businesses slip away.

Published on Feb. 12, 2026

Got story updates? Submit your updates here. ›

According to Ron Birkey, president and CEO of Birkey's, an equipment dealership in Illinois, dealers should focus on three key financial metrics to ensure the long-term viability of their businesses: absorption rate, used equipment turnover, and financial leverage. Birkey argues that dealers who concentrate solely on profits rather than managing their balance sheets are at risk of going out of business, as the industry has seen a nearly 50% decline in the number of dealerships since 1980. He advises dealers to prioritize parts and service, carefully manage their used inventory, and maintain a healthy debt-to-equity ratio in order to position themselves for success in the changing farm equipment market.

Why it matters

Birkey's insights highlight the importance of financial discipline and strategic planning in the farm equipment dealership industry, which has seen significant consolidation over the past few decades. As the customer base evolves, with fewer traditional farmers and more "weekend" farmers, dealers need to adapt their business models to focus on profitability, asset management, and financial leverage in order to survive and thrive.

The details

Birkey emphasizes three key financial metrics that dealers should monitor closely: absorption rate, used equipment turnover, and financial leverage. Absorption rate measures the percentage of a dealership's total costs that can be covered by the gross profits from its parts and service departments. The industry average is around 55%, but Birkey's dealership aims for 70-75% absorption. Used equipment turnover, calculated by dividing annual used equipment sales by average inventory, should be closer to 4 times per year, double the national average of 2 times. Financial leverage, the ratio of a dealership's total assets to its equity, is also critical, with the industry average around 3.5 to 1. Birkey cautions that ratios above 7 to 1 can make dealers overly reliant on lenders and limit their ability to manage the business effectively.

  • The number of farm equipment dealers has dropped from 8,800 in 1980 to 3,400 in 2002, and is projected to decline further to around 1,800 by 2014.

The players

Ron Birkey

President and CEO of Birkey's, an equipment dealership established in 1954 in Fisher, Illinois. Birkey has worked for the company since 1977 and took over the leadership position in 2000. Birkey's is a $100 million company with 250 employees and eight Case IH and New Holland equipment stores, two Case Construction locations, and a DaimlerChrysler dealership.

Got photos? Submit your photos here. ›

What they’re saying

“The good news is that the number of customers per dealer will increase, so from the perspective of surviving dealers, there will be great opportunities, although the challenge will be, in some ways, to be the last man standing.”

— Ron Birkey, President and CEO (farm-equipment.com)

“Any dealer who doesn't understand financial leverage and how to calculate it should have someone in-house who does, or have a good advisor who can help manage this critical issue.”

— Ron Birkey, President and CEO (farm-equipment.com)

The takeaway

Birkey's insights highlight the need for farm equipment dealers to move beyond a sole focus on profits and instead prioritize financial discipline, asset management, and strategic planning in order to navigate the changing industry landscape and position their businesses for long-term success.