The Q2 earnings for publicly traded distributors aren’t pretty. After netting out financial tricks, most distributors are reporting lower sales and profits. Going forward, will you be happy with just matching them, cutting costs, and trying harder? What about profitability and fading-economy statistics?
Why Not Find More Gold In Big Accounts?
How? Apply a cost-to-serve (CTS) model on every account so you really understand your net profit and loss potential, and the fading-economy statistics. Then, investigate the sub-groups to uncover the:
- 10 most net-profitable accounts
- 10 biggest profit-losing accounts
- 10-20 most up-profit accounts, this year over last
- 10-20 most down-profit accounts, this year over last
Then Take Action
- Obtain your customer profitability rankings for two years.
- Contrast each account’s profits (or losses) from this year with last year. Then, rank the accounts with the biggest positive profit gains at the top down to the biggest drop in profit at the bottom.
- Ask branch managers and sales reps about the reasons behind the big-up/down accounts.
- Don’t be dismayed by stunned looks. They look at the same aggregated financial reports you do and the big-up/down stories invisibly offset each other.
- But, do learn lessons from the big-swing stories to apply going forward. What will you do differently to increase the odds that there will be more big-up and fewer big-down stories at year’s end?
- Look also for accounts that had about $1000 in profits last year and $3000+ this year. Are these innovative, growing businesses? Find emerging stars and pursue partnering with them. They will then grow you through future economic ups and downs.
Turning Winners Into Losers is a Team Effort
Turn losing accounts to winners and get more share out of both groups with some team ingenuity, even in a fading-economy (reps can’t do these new tricks on their own.) How? To start, read my May 3, 2016 blog post on how CEOs can lead “audits” of the best accounts to find inefficiencies that can be fixed at no cost! Customers love it and will reward you with:
- More discovered volume
- Increased average order size from replenishment system improvements
- Lower cost-to-serve as a percent of sales
- Improved employee productivity and profit ratios
- Best-replenishment practices to share with big losers
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