I was doing some prep work for a speech for the Health Industry Distributors Association (HIDA) when an item on their Members’ Financial Survey jumped out at me. Atypically, the survey had a set of numbers showing the three-year trend for gross margin dollars per full-time equivalent employee (FTEE). It got me thinking about the following.
What’s a Good Level to Grow Gross Margin Dollars per FTEE?
It varies depending on the channel, but among HIDA distributors the average for the last three years has been about $135K gross margin/FTEE. However, the best performer in each of three sub-groups in 2015 was 16%, 60%, and 90% higher than the average.
Continue reading 42. Grow Gross Margin Dollars per FTEE
What Are Your Profit Moats?
Warren Buffet buys companies with identified “profit moats.” Moats are sustainable sources of profit and free cash flow. Financial reports often don’t reveal profit moats, so you must be able to uncover them for yourself. Why does Buffet like profit moats? Because they help to manage assets and cost centers. As a distributor, you build your moats of profit-power with customers that grant you–on average–a steady stream of profitable orders.
In every business, customer order streams vary widely at being efficient profit generators. A profitable order (versus an unprofitable order) contains more gross margin dollars (GM$s) than cost-to-serve dollars (CTS$s) that your business spends to fulfill the order. Profit (or loss) dollars (P$s) is the remainder.
Continue reading 41. Build Your Moats of Profit-Power by Tuning Profitability
There’s no doubt that curiosity is the key to innovation. But many of us are stuck in the same old ways of thinking. Here are a few discussion points for you to test your own knowledge.
Which are true, and which are false?
- Without exclusive, profit-guaranteed supplier franchises, most distributors sell commodities for a price.
- Copying the latest efforts of competitors and channel friends yields NO competitive advantage. In fact, maintaining competitive-parity perpetuates poor financial returns.
- High profits come from unique offerings, which you must invent.
- Not all experiments are successful, but those that are must at least fill new needs that customers value enough to pay more for.
Continue reading 40. Boost Curiosity to Innovate