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?

1. Without exclusive, profit-guaranteed supplier franchises, most distributors sell commodities for a price.
2. Copying the latest efforts of competitors and channel friends yields NO competitive advantage. In fact, maintaining competitive-parity perpetuates poor financial returns.
3. High profits come from unique offerings, which you must invent.
4. 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 →

Line item profit analytics (LIPA) can reveal a rich new vein of customer value-added solutions. WayPoint provides thirteen tools to clarify customer buying statistics for you, and flag unnecessary and hidden buying activity that can cost from 5%–30% or more of a customer’s annual purchase total.

The first step to profitability is to fix these profit leaks.

Here’s why.

• You will win more sales while building trust and loyalty
• You will create a bigger barrier for competitors
• You will improve profits by reducing your parallel, unnecessary service costs
• You will evolve a powerful new pitch and the capability of cracking target accounts

Continue reading 39. My Sales Reps Won’t Do That! →

MRO Vending Machines for Distribution Customers’ Locations are Hot

Big distributors such as Avnet, Fastenal, MSC, etc. report rapid installations of internet-connected, vending machines at customer locations. At Apexsupplychain.com read how their machines – installed by distributors – are:

• For “high-use” SKUs (lots of picks) that are “mission-critical” (downtime costs are big)
• Eliminating stock-outs and excess inventory
• Reducing downtime with handy locations and 24/7 availability
• Reducing re-ordering costs, etc.

Continue reading 38. Vending Machines for Distribution Customers? →

What’s your competitive edge? Maybe it’s something like: “Service value from our good people and our reps’ customer relationships.” Really?

• Can you measurably prove these hopes?
• Do service metrics vary for each customer niche?

If not, are your reps happy to get “last-look” to meet competitive prices?

What to do? Here’s an answer: Check out my Syllabus below to find ways to boost sales and pre-tax return on total assets (ROTA) by 2–4 times. Continue reading 36. Selling Service-Value to Price Buyers →