Independent survives recession doing it 'his way'

Larry Moskalyk, an independent mobile distributor in Largo, FL, learned early in his business career not to take anything for granted in running a business. He learned to pay attention to changing business conditions and to take corrective action quickly. These lessons led him to a successful career in mobile tool sales in highly competitive Central Florida.

At age 63, he feels confident working as an independent distributor and looks forward to continued success. He learned early on in his business career the importance of staying on top of market conditions, keeping aware of what operating systems and methods are available, and reacting quickly to change. He was able to survive the recession that hammered the Central Florida economy.

In the two decades he spent working in the appliance and ceramics industries before going into business for himself, he paid attention to what does and doesn't work in running a business.

By the time he decided to start his own business 15 years ago, he was well versed in several key areas, such as shipping and receiving, sales, customer service, personnel management, inventory management and retail merchandising. He wanted his own business to have more control over his income and his personal freedom. One thing he didn't know was what type of business made sense for someone like himself; someone with lots of drive but limited startup capital.

The right fit

In researching opportunities, Moskalyk came across mobile tool sales. Given his background in retail operations and merchandising, he saw mobile tool sales as a good fit. He hooked up with one of the national flags that did not then have a truck in the greater Tampa market in 1998. He cashed in a portion of his retirement money to get the down payment on his first truck and his starting inventory.

To minimize his tax obligations, he took a five-year lease on the truck, which had a $65,000 purchase price. "It's a 100 percent write off," he said of the leasing option. "If you buy it, you can only claim the depreciation."

Moskalyk took to the business immediately and was surprised by his own success. He sold his starting inventory in four weeks, a lot sooner than he expected. He credits his early success to his people skills, which he honed working in appliances and ceramics.

Laid-back selling

A key lesson he learned in his early years was a laid-back sales approach. He walks into every location and strikes up a conversation about topics not related to business. After this, he moves slowly to business topics.

He has never "toted and promoted" as a regular practice. He only brings a new tool into a shop if it has a new feature. "Carrying stuff in is pretty tough for what the take is," he says.

"Don't be pushy with the guys," he says. "Guys will tell me what they want. In his (the customer's) mind, there's a reason why he's not taking it right now. It's easy to sell the stuff, but collecting the money takes tact."

He made it a point to find areas of common interest with his customers. As a smoker, he asked them for tips on how to quit smoking. As an occasional lottery ticket buyer, he found lotto a popular topic among service techs.

As a race car enthusiast, he made it a point to talk about drag racing with the many techs that share this interest, particularly those in the restoration shops that are prevalent in Central Florida. He carried around pictures of his 1977 Corvette which he had rebuilt and repainted; a lot of guys loved to see it. "Buy someone a beer at the race track and it can go a long way," he notes. "It's all PR. They will pay a little extra because of you, yourself."

He even began carrying dog biscuits for the shop owners' pets; in some cases, the way to a man's heart is through his dog.

Key selling points: price and warranty

Moskalyk also brought a deep understanding of the importance of offering a fair price and honoring warranties. He was able to win customers from competitors who failed in these areas, especially warranties. Moskalyk noticed that some mobile distributors view warranties as a nuisance and treat them accordingly. He won customers by honoring warranties on tools that he did not sell.

In one case, he was able to get a tech's air ratchet fixed for free. The distributor who sold the tool wanted $100 for the repair. "If it had cost $20 to get fixed, it would have paid for itself and then some," Moskalyk notes.

"You do them a favor like that and they're going to be happy," he says. "Public relations is what it's all about."

Something that surprised him was that the size of the shop was not always an indication how good a customer it is. Moskalyk ultimately realized that shops with three or four techs were some of his best customers. "You do better business in them than the big ones," he says. "They just buy more stuff."

Moskalyk learned that establishing a good rapport with customers helps reduce collection problems, which he views as the most difficult part of the job. "Collecting money takes talent," he says. His better customers will warn him if someone should not be trusted. In one case, he got a call from a shop where a technician had recently quit. The people at the shop asked him if this technician owed him money on any tools. They promptly confiscated the drill that Moskalyk had sold that tech and held it for him.

Moskalyk became a top producer for his flag in his first year. The franchise rewarded him by covering his convention expenses.

Recession strikes

Everything was going well until 2008. That year, the automotive industry began declining nationwide. The downturn hurt Florida especially hard, due to its large number of automotive dealerships. The tourism industry also began to suffer, further eroding business for many of Moskalyk's repair shops. Car owners began to put off maintenance and repairs. Shops began asking him if they could return unpaid tools. The housing market also took a dive, sending shockwaves through the local economy.

Moskalyk was losing 10 customers a week. But he didn't hesitate to react. As he lost customers, he pared his purchases so that he did not get stuck with too many receivables and was able to stay current on his payments. After six months of falling sales, however, he decided to exit the business. "I was watching the numbers every week and they were dropping. I wasn't about to keep plugging along and see the numbers go backwards and lose everything I've worked for all my life," he says.

He sold his leased truck to a distributor in another region. This gave him a financial cushion to give him enough time to consider his options. His backup plan was to sell his 1977 Corvette, which fortunately didn't become necessary.

He had about $55,000 on the street and spent several months collecting payments. He also looked for another type of business to get into. He spent a year investigating other business opportunities.

Ironically, the more he learned about different business franchise opportunities, the better the mobile tool business looked, despite the recession. Most franchise businesses require a lot more start-up capital than mobile distribution, Moskalyk once again realized. Hence, he began to consider returning to mobile tool sales.

Back to tool sales

When Moskalyk first got into the business, he felt flag organizations offered entrepreneurs advantages over being an independent, such as namebrand recognition and management support. While this holds true, through research he found that independent distributors have less overhead and lower purchasing costs.

Moskalyk also realized that the flags have some proprietary tools that independents can't sell. Proprietary tools account for 20 percent of the total. To offset this advantage, he could offer lower prices on some tools. After weighing the options, in 2010, he decided to get back into tool sales as an independent.

He began looking for trucks for sale on the Internet. While searching for trucks, he came across a 16' trailer that a mobile distributor in Ohio was selling. The image of that trailer got him thinking: trailers cost less to buy and operate than trucks. Yet they can carry just as much inventory and can offer the same amount of selling space. "It cuts your overhead phenomenally," he notes.

The trailer was smaller than his tool truck, but with the Ace Tool Co. warehouse close by in Largo, he reasoned he wouldn't need to carry as much inventory.

Trailer provides a solution

The distributor selling the trailer had bought it new in 2006 and refurbished the interior with carpeted walls and wood shelves. The trailer had four shelves on both walls and lights mounted on the ceiling. The distributor had only been in business for nine months and was leaving the business for another opportunity.

Moskalyk bought the trailer for less than one tenth the purchase price of the second tool truck he had leased as a flag dealer.

He hooked the trailer to his Chevy Silverado pickup truck. To ensure power, he purchased a Honda 3000 inverter generator and fastened it to the trailer's front guard rail. He chose that model generator because it was the only one that came with a 100 percent, three-year warranty. The generator can run three straight days on three gallons of fuel.

There were other advantages.

He caught a big break on insurance. Where he had paid $13,000 per year to insure his tool truck, he pays much less for the trailer. Because the trailer attaches to his Silverado, his pickup vehicle's insurance, which costs a fraction of his tool truck's insurance, covers the trailer.

He caught an even bigger break on fuel. Traveling 100 miles a week costs him $100 in gas, which is less than half of what he paid with his tool truck.

In addition, his pickup is more comfortable to drive than was his tool truck. "It's a lot more relaxing; it's a simple, laid back way to do it."

The only disadvantage with the trailer is that it is more difficult to park in some places, he notes.

Moskalyk stops at the Ace Tool Co. warehouse in Largo several times a week before starting his route. "I don't have to carry a lot with the warehouse being so close," he notes. He now carries $20,000 to $25,000 in retail inventory, compared to $75,000 to $80,000 he carried on his truck.

Having the Ace Tool warehouse close by also allows him to make deliveries on a day's notice. No more three- and four-day waits for customers. Sometimes he tells customers to pick an order up at the warehouse.

Independence has advantages

Moskalyk learned there were yet other advantages to being an independent. As an independent, there are no territory restrictions. Hence, he is able to serve a larger territory. The advantage to this is he can "cherry pick" his customers. This has been perhaps the greatest benefit of all for Moskalyk.

Where he used to have to deal with 10 to 15 problem payers a week as a franchise distributor, now he only has two to three problem payers per week.

His computer costs have also been lower since he went independent. Thanks to the Allsoft Technologies management software he got at Ace Tool Co., he pays $450 per year for his software subscription, which he claims is very economical for this type of software. The software tracks his inventory, purchases and receivables; prints receipts; and at the end of the year it allows him to calculate his taxes. Ace Tool Co. provides him a tool and pricing CD every few months. Beyond inserting the new CD, there are some tools and prices he must input manually.

Another advantage as an independent is no minimum purchase requirements. Without minimum requirements, he feels he has more purchasing flexibility.

His wife, Debbie, handles the bookkeeping for him and does occasional deliveries.

Moskalyk uses a Chase Paymentech credit card processor to accept debit and credit payments. He makes it a habit to write down card numbers in case he might need to collect a payment. While many customers still pay with cash, more are using credit and debit cards. Some pay using payroll deduction if their employer provides it.

He offers most customers $3,000 with 10 weeks to pay. He offers more to those with good payment histories.

Since he got back in the business as an independent, the local economy has improved, but it has not fully recovered. Despite the improvements he has made in his business, he has not reached his 2007 high mark.

Tools evolve, creating opportunities

He credits tool manufacturers for continuously improving products.

Flashlights have become one of the most popular items lately, thanks to the higher luminosity they now offer. He has been surprised by the number of techs that want 640 lumen LED flashlights. "If guys want them, I'll get them," he says. When he asks them what they will do with their 350 LED lumen flashlights, the techs tell him they will use them at home.

At this writing, some techs were waiting for Streamlight to release colored flashlights since they are easier to locate in a busy shop than the black ones. Moskalyk has been surprised to learn that many techs have specific color preferences.

Diagnostic tools are also popular. "The big thing right now is diagnostics," he says.

Because many diagnostic tools are new, some customers want to borrow them before buying them. Moskalyk is wary of doing this, even though he knows some distributors do it. He does not want to be responsible if the technician damages the tool. When asked to borrow a diagnostic tool, he refers the customer to another technician who has used the tool to get an opinion.

Cordless power tools have also become popular of late. Moskalyk notes that cordless tools are now coming with longer warranties, which customers like.

He does not aggressively sell toolboxes. "It's tough with the financing," he says. "If you sell these guys toolboxes and they don't pay, then you've got to 'repo' it."

If he had it to do over again, Moskalyk doesn't think he would do anything differently. He did well working for the flag. He thinks it made sense to go independent when the economic slowdown hit.

As an independent with a trailer instead of tool truck, he has become more profitable. With fewer problem payers to deal with, he is also more relaxed, which keeps him in good spirits while visiting his 20 shops per day, six days a week.

The biggest mistake he sees other distributors make is not keeping current on their payments. "They think that money belongs to them and it really belongs to the business," he says.

He encourages people interested in the business to first spend time riding on a truck and ask the distributor as many questions as possible. "It's definitely not as easy as it looks," he says. "It's a fun job, but you've got to be hard on people, too."