Big-Accounts Range Widely in Net Profitability
Distributors! When you rank your customers by net-profitability, and then keep segmenting, you can find some amazing facts:
- Pareto’s law applies to big accounts, but only for margin dollars, not for profits! The biggest 20% of companies will contribute around 80% of gross-margin dollars.
- Only a third of the big accounts are net-profitable, and they range from amazingly so to modestly so.
- The middle third will be around break-even before deducting sales commissions and modest losers after deducting commissions.
- The bottom third are losers before commissions due to excessive activity costs for, usually for small-dollar picks and orders
- A few may be shockingly unprofitable.