How important would it be to know who your most
net-profitable customers are? Which ones are growing the fastest? Would a team
effort to better partner the profitable, fast-growers payoff?
Why not try a simple experiment?
Continue reading 156. Measure and Act on What Matters
Forecast the Global-Everything
The global economy is slowing down. Do be more cautious with
debt and big, long-term investments. Otherwise, focus on the net-profit gains
that you can best forecast and control. Take your 5-10 biggest
net-profit-upside-potential accounts to the “next-level”.
Assumptions About Customers:
- Top 20% customers may yield 80%-plus of your gross profit dollars (Pareto). But, one in five is typically unprofitable. They are big losers due to huge, small-dollar picks, orders, and/or returns.
- For net-profit rankings: your top 2% will yield 70-90% of operating profit. (All net-profitable accounts – about 20-40% – will yield 120-150% of your financial profits. They pay for both the losing accounts and residual operating profit.)
- A team effort will always find new, upside possibilities within best 2% accounts.
- Another 4% subset of customers are high-growth “gazelles”. They are run by ambitious, innovative leaders and have a tightly focused strategy at which they excel. Gazelle buying needs (and sales) grow 2-4X faster than their peers. As innovators, they are apt to be open to your ideas for replenishment-process improvements. Partner them, and they will grow you for years.
- Your competitors are not thinking this way. Their reps do what they can. And, those reps won’t be able to (on their own) counter your total-team solutions.
- Rank all customers by year-over-year increases-to-decreases in gross profit dollars. (Better by net-profit gains, if you have a cost-to-serve model). The most up and down accounts will shock you.
- Focus first on most-up accounts. Why? Nobody wants to take credit for fumbled, down accounts. And, big-up accounts may be still expanding with unsolved replenishment process needs.
- Some accounts will be way up. Are they gazelles? Do more research to create a top-5, gazelle, target list.
- Selling and installing next-level replenishment systems requires honcho-led team selling with three stages. Find new system needs to fill. Co-create and resource them. Then, do ongoing, proactive maintenance. For much more on – “Enterprise Account, Team Selling” – follow the link at the bottom to an appendix of past documents and how-to blogs.
Will This Work for
Certainly! As you and colleagues skim through the appendix
material, reasons for why you can’t change will arise. Work through them. As Henry Ford said: “if you think you can or
can’t, you are right.”
CLICK HERE to view the appendix
Many distributors do
not share general financial numbers with all employees on a regular basis. So,
new plays and innovation metrics (based on insights from customer and SKU
net-profit analytics) can’t be pursued. Too bad! All stakeholder groups would
WHY NOT SHARE?
In many of my
presentations over the years, I’ve asked roomfuls of distributor principals:
Continue reading 151. Share the Secret: “Profit” Is a Clean Word!
Private Equity (PE) Distributor Roll-Ups: The Good, Bad, and
PE Good News:
In ’08: The Central
Banks rescued PE firms from their over-paid, over-leveraged ’07 deals. By
lowering interest rates to near-zero for 10 years good things happened:
Continue reading 149. What Distributor Roll-Ups Will Become Zombies?
Growth and Digital-Commerce Re-Modeling
Studies trumpet that: 60-80% of outstanding companies’
profitable growth comes from “innovation”. Could you use some bigger profits
and more agility? And, all legacy channel players need to innovate to meet the developing
digital desires of millennial B2B buyers.
Continue reading 145. Innovate at 32 Degrees
A distributor needs to hire six hourly people across four
“We can’t find
acceptable candidates for our normal starting wage. We don’t want to hire new
people at a higher rate than our veterans. And, we don’t want to hire flakes
who can’t pass our drug test. What do we do?”
Continue reading 142. Hiring Hourly People Solutions