Jim Mayfield, president of Rainbow Ag, had a thriving 2-store John Deere dealership in northern California, yet he knew that he would never be the multi-store, multi-million dollar John Deere “dealer of tomorrow.”

“The dealer of tomorrow has $50 million in just tractor sales and my whole dealership wasn’t making $50 million. There wasn’t any pressure from Deere, but they said I wasn’t a generational business. Once I’m gone, there was not an opportunity for my dealership to continue with John Deere. I went on for a number of years with that knowledge — while enjoying tremendous success. The question was should I seek an acquisition or be acquired?” Mayfield says. He bought the original dealership in 1983 with his brother and financial help from his father. At that time, the dealership was mainly an irrigation business for vineyards and he added John Deere to the product mix in 1984.

Rainbow Ag

Founded: 1983

Locations: Ukiah and Lakeport, Calif.

Employees: 45

Lines: Outdoor power equipment lines include Honda, Husqvarna and Stihl. Feed lines include Purina, Science Diet and other premium brands. Irrigation lines include Netafim, Rainbird, Nelson and others. Consumer items include Wrangler and Carhartt clothing, pet supplies and lawn and garden products.

Revenue: $10+ million

 

Mayfield seized a unique opportunity in 2013 to sell off his John Deere business to Belkorp Ag, a new dealership group seeking acquisitions, with Rainbow Ag continuing as an outdoor power equipment dealership and country store. Along the way, he found a new career with Belkorp and now serves as vice president of aftermarket. He remains president and owner of Rainbow Ag, but has handed off management responsibilities to a team.

Today, Rainbow Ag has 2 stores in Ukiah and Lakeport, Calif. Belkorp Ag has 8 locations in northern and central California. The two dealerships co-exist in a unique arrangement. Belkorp leases a storefront just two businesses away from Rainbow Ag and even leases out a portion of Rainbow’s Ukiah service shop.

Positioning for Acquisition

Before the acquisition, Rainbow Ag had locations in Ukiah, Calistoga and Lakeport, Calif. The Ukiah and Calistoga stores carried John Deere equipment and its Lakeport store focused on outdoor power equipment and retail merchandise for rural lifestylers, such as clothing, feed and pet supplies.

The northern California vineyards are a good market for compact equipment, and the area’s rural lifestyle and large property owner base had grown over the years. “In the first few years of our business, I wish I could say there was a strategy, but there wasn’t. As we evolved, we focused on being a supplier to the rural homeowner and rural lifestyler. It was clear that Rainbow Ag was not product driven, but market driven. We partnered heavily with our vendors and started attacking the rural lifestyle market,” Mayfield says.

Belkorp Ag: Building a New Dealership

Nathan Green is chief operating officer of Belkorp Ag.

Photo Courtesy of Craig Maize

In just 4 years, Belkorp Ag has built a dealership group with 8 locations and 170 employees. What’s even more impressive is that prior to 2011, Belkorp wasn’t even in the equipment dealership industry.

Belkorp Ag is part of Belkorp Industries, a family-owned group of companies with headquarters in British Columbia. “In 2011, we had the opportunity to start putting together some dealers in California that had traditionally been single-store dealers. There is a trend in Deere to put together dealer networks for several reasons. The equipment today is a lot more expensive, so it’s very hard for a single family to have $20 million in equipment inventory sitting on the lot. And the technology requires specialized people, so it’s difficult to pay for that with only one store,” says Nathan Green, chief operating officer of Belkorp Ag.

Belkorp Ag acquired 5 dealerships in just 2 years, establishing itself as a leader in northern and central California. Rainbow Ag was one of those acquisitions. With that acquisition, Belkorp Ag didn’t just add a location, they added the dealer principal, Jim Mayfield, to their management team. Mayfield joined first as a consultant, then regional manager and now is vice president of aftermarket.

“His coming over helped with the transition tremendously. Part of his strength is bringing people together,” Green says. “We wanted to have a bit more sales and marketing perspective on the aftermarket segment and not just wait for business to come in the door and that’s another strength Jim has. We’re doing a consolidated marketing effort for all of our stores and developing a more cohesive marketing package. We’re encouraging our teams to get out in the marketplace and ask for business. Our motto this year in the aftermarket is ‘Ask for it.’”

Green says Belkorp Ag has a company culture that’s different than most dealerships. “We have a cultural shift from the owner-operator store and we’re empowering our team to make decisions on the spot. If a decision has to come to me, then we haven’t supported the customer quickly enough,” he says.

“Our organization chart is upside down. The customer is at the top level and then parts, service and account managers. It’s a work in progress, but most people know what the right decision is. If something does go badly with a customer, then that’s a learning experience,” Green says.

Much of Belkorp Ag’s revenue comes from production farmers, but the rural lifestyle market continues to grow in importance. He says the parts department is helping sell rural lifestyle equipment, such as mowers, UTVs and smaller tractors, until the volume requires dedicated salespeople.

Green says the dealership will continue growing through acquisition. “Our last acquisition was in August of 2013 and that’s been a good breather for us. We’ve been able to spend time working on our culture, bringing our team together and working on the processes. We’d like to double and triple the size that we are today. Not all of that will likely come out of California. Our objective is to be a much bigger John Deere dealer than we are today,” Green says.

Rainbow Ag’s tagline, “Experience the difference at America’s country store,” showcases its diverse product line. The dealership carries Stihl, Honda Power Equipment and Husqvarna outdoor power equipment. Horse and pet supplies include Purina, Science Diet and other brands of feed, tack, pet and livestock supplies as well as healthcare products and more. Domestic and commercial irrigation product lines include Rainbird, Nelson, Netafim, Toro and others. They also carry Wrangler and Carhartt clothing.

“We worked hard in the last 5 years to become a good candidate for acquisition. A lesson learned is the best time to make it happen is when you have created maximum value for your dealership,” Mayfield says.

Seizing Opportunity

The opportunity presented itself with Belkorp Ag. Its parent company, Belkorp, is a family-owned group of companies with headquarters in British Columbia. Belkorp entered the farm equipment market in 2011 when it established its ag division and acquired a dealership in Modesto, Calif.

Mayfield was familiar with Belkorp Ag as a fellow John Deere dealership and the time seemed right to investigate an acquisition. “I knew that it was time to pursue a partial liquidation. The tough part is that for many dealerships like mine, the employees become part of your family. I had watched their kids grow up. It was important to me to make sure we were dealing with quality people on the other side of the transaction,” he says.

“There’s a fear factor involved. That’s the biggest hurdle any dealer has to face and something I had to overcome. Was I jumping out of the fire and into the frying pan or was I creating an upselling opportunity?” Mayfield says. He calls out several factors that helped convince him this was the right move.

“I was selling to a company that had interesting ideas for growth. They were new, as John Deere dealers go. They had only been in business for 2 years. Belkorp Ag’s aggressive acquisition plan was appealing. Perhaps I was providing an opportunity for myself and for my staff to grow in a larger organization. Large companies are hungry for talent and many times the ceilings are much higher,” Mayfield says, referring to career opportunities.

Selling the Business

Mayfield relied on department-based financial statements to properly set the value of the John Deere portion of his business as well as on good legal counsel. “I had hired a lawyer maybe twice in the last 30 years, but we needed to have a good understanding of what we were getting into and the liability going forward,” he says.

After negotiating the basic deal, he worked with a lawyer with expertise in dealership acquisitions. However, he says, “The business people were driving the show. The folks we were working with at Belkorp Ag were making the business decisions and the attorneys were showing us how to move the process forward.

“It was a lot of work and there were a lot of details and a lot of inventories and accounting and verification and due diligence. It was a complicated transaction because they didn’t buy everything,” Mayfield says. “The initial discussions were confidential. You never know. These things can go right down to the end and not happen. You don’t want to create undue fear or anxiety or anticipation in your staff and family. We kept it fairly close until there was a signed letter of intent and then very quickly we shared it with the entire organization so there was some clarity and openness.”

The transition lasted just 6 months and included selling the Calistoga location. “It had to be fast because it is so disruptive. We tried to move along as quickly as possible and didn’t get hung up in the minutia,” Mayfield says.

The remaining question for Rainbow Ag was whether the dealership could be successful without John Deere — which accounted for about half of its revenue. “We had some estimates and did some forecasting, but you have infrastructure and debt. We wondered how important the John Deere brand was to the Rainbow Ag brand and whether we could make it on lawn and garden and outdoor power and a smaller service department and still handle the overhead load. Much of that continues as a work in progress. We thought we were going to have a viable entity, but until you put a year or two in, you really don’t know,” Mayfield says.

Changing Careers

The acquisition was the first step in a new direction for Mayfield personally. “Life can get boring, even as an entrepreneur. I had been doing the same thing for 30 years and found myself getting more involved in the community and doing volunteer work. I was leading Rainbow Ag as the CEO and setting strategy, but I wasn’t as much involved in the day-to-day selling. I was ready for a new chapter,” he says.

Belkorp Ag offered him that opportunity for a new career direction, first on a consultant basis. Mayfield helped with the acquisition of another John Deere dealership, the same one that had been his own competitor for many years. He soon officially joined the company, becoming regional manager and is now vice president of aftermarket. Mayfield says he had concerns about transitioning to the role of employee. “Could I function in a bigger role in a corporation? Could I tolerate having a boss?” Mayfield says. “A lesson learned is don’t be afraid of change. Change can bring tremendous opportunity.”

Rainbow Ag is a 2-store dealership in northern California. The dealership sells and services outdoor power equipment, irrigation equipment, feed, clothing, tack, pet and livestock supplies as well as animal healthcare products. The Rainbow Ag team includes Mark Wedegaertner, general manager; Thomas Prine, manager of outdoor power sales, service and parts; Carey Williams, Ukiah, Calif., store manager; and Steve Shepard, irrigation engineer.

Setting a New Course

Mark Wedegaertner, Rainbow Ag’s former chief financial officer, is now general manager and the dealership continues its goal of being America’s country store. Its Ukiah and Lakeport stores are each set up with the same product lines. “We have always had a wide range of products and that kind of diversification has helped us through ups and downs. In slow years, when we didn’t sell a lot of tractors, we focused on homeowner-type equipment,” he says, such as their Honda, Husqvarna and Stihl products.

“Ag equipment made up the majority of our parts and service business, so after the acquisition we needed to expand with landscapers and tree service companies. Those power equipment brands have a tremendous amount of brand loyalty,” Wedegaertner says. “In the last couple of years, we’ve moved up in the product segment. We have a lot of competition from big box and hardware stores, so we focus on quality.”

They’ve found unique ways to compete. For instance, they’ve increased sales related to chainsaws by promoting accessories. “We never have a chainsaw go out the door by itself. We sell eye and ear protection, chaps and chain files. It just makes sense. You don’t spend $300 on a piece of equipment and walk out with nothing to go with it,” he says. Plus, accessory sales offer a higher margin, so the extra sales efforts are worth it.

Offering ethanol-free gas is a related upsell opportunity for the dealership’s power equipment. Rainbow works with a local gas distributor to package and sell 5-gallon covered pails of ethanol-free gas.

Products for pet owners drive a good amount of business, and the dealership sells nearly 15 brands of dog and cat feed, along with kennels, supplies and health care products. “Our pet food business is changing rapidly and we’re offering a wide variety of new products. We have really put a fair amount of energy into staying on top of that,” Wedegaertner says.

Reaching the consumer market requires retail expertise, and Rainbow takes advantage of display and marketing ideas from its vendors. They also build relationships through newsletters, community sponsorships, radio and TV advertising and special events. For instance, for one promotional event, the dealership brings in a portrait photographer who photographs owners with their pets.

Their irrigation customers have remained steady over the years, accounting for about 20% of their business.

Rainbow’s competition includes a Tractor Supply store just 3 miles away. “We price match them. We tell our customers that you don’t have to spend more to buy local. We’re locally owned and our low prices are guaranteed. We gave up margin to gain market share,” Wedegaertner says. That strategy does have its limits, though. “We have dropped a couple of lines because we didn’t feel like we could compete and still focus on our core customer. One product we dropped very quickly was fencing. Tractor Supply is able to have national buys and they were selling for the same price we were buying.”

Wedegaertner has continued Mayfield’s “team management” style of leadership. The leadership team also includes two location managers, an outdoor power equipment manager, service manager and irrigation engineer. The management team communicates regularly with Mayfield by phone or email and meet monthly. They also have quarterly meetings with the extended Mayfield family. “We have all worked together for quite a while. Some may say it’s difficult to run a business by committee, but it’s working out OK for us,” he says.

Rainbow Ag’s future could include another location. “We really feel like we have the management team to run 3 stores. We’ve looked at a couple of acquisition opportunities and depending on the location, it might make a lot of sense,” Wedegaertner says.

Mayfield says his career future right now is at Belkorp Ag, a company that he says works to be the dealer of choice and the employer of choice. “I have been able to grow into a larger position with a bigger geographic area. It might be the last chapter in my career, and it is fascinating and a lot of fun,” he says.