How Money is Made in Wholesale Distribution
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•profit analytics •business math for distribution •cost-to-serve math •money-losing sales •money-losing activities •distribution analytics •money-losing customers •profitability managementThursday, August 9, 2018—Randy MacLean shares his analysis of over $65B of distribution business to help others shed incorrect assumptions about how to make money. Businesses that have stellar results have been able to understand profit dynamics and move the profit needle not just by five or ten percent, but by doubling or tripling the bottom line over their competitors. In most businesses, the focus has been on sales thresholds and that each sale will contribute to the bottom line. The assumption is that at the end of the year, the bottom line will be positive if all thresholds are met. According to Randy, this is simply not true. Consistently, the findings show that the majority of money made in a business is brought in by a small number of clients and activities, while the rest of the business actually generates a loss. In addition, most executives have been taught that if there is enough gross profit or margin on a sale, then a contribution to profit is made. However, most sales have a cost structure that is higher than the gross profit provides for, therefore, generating losses. Basically, all the good business is wasted on the bad business. Randy's recent analysis has turned in some shocking insights. Most Transactions are Not Making Money. The analysis showed that 62.5% of invoices lose money. This means there is an enormous amount of activity going on that is contributing to losses. This activity guarantees, at best, average performance. Hyper-performers have figured this out and have actually abandoned bad business for good business. To get to the next level, executives need to determine which are good clients and which are bad. Competitors Trade Customers. This is a fact of business. However, the best companies use analytics to start to trade wisely, trading bad off for good. They recognize which accounts to shift off to the competition, while focusing on the most profitable business. Using new analytics and refocusing notions of how money is made are the new wave in business success. And, as Randy has seen firsthand, this is what leads to a super-profitable enterprise. For more information about Randy MacLean, visit: www.waypointanalytics.net |
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2/1/2024 Distribution industry profits are down. This session explains why, and suggests four actions that will restore profits and cash flow. The 7 Areas That Need Your Focus (brief) 6/2/2021 The 3rd of 3 lists defining the markers of Distribution companies outpacing their peers. The 6 Attributes of Super-Profit Companies 5/26/2021 The 2nd of 3 lists defining the markers of Distribution companies outpacing their peers. 5/13/2019 Customer segmentation can be one of the most powerful tools you can use to develop and implement plans to optimize and deepen your customer relationships. Cost Structures: What Makes for a Good Sale? 8/9/2017 Learn why distributors can't simply rely on gross margin when determining whether a sale will add to the bottom line. Changing Sales Strategy Using LIPA 8/2/2017 Randy MacLean talks about the emergence of a new sales strategy. Using WayPoint's High Volume Account Report to Increase Profit 3/1/2017 Randy discusses the benefits of the extraordinarily valuable High Volume Account Report. Innovate Podcast: Ultimate Customer Segmentation To Drive Profit 2/9/2017 Dirk Beveridge interviews Randy MacLean of WayPoint Analytics on the ultimate profit-based customer segmentation. Innovate Podcast: The Analytics of Super-Performing Distributors 1/12/2017 Dirk Beveridge interviews Randy MacLean of WayPoint Analytics on the analytics and metrics of super-profitable distributors. Wholesale / Distribution Basic Math 11/16/2015 Randy MacLean talks about the little-known real math behind profit production in a distribution business. Keep the Best, Then Reform or Get Rid of the Rest 8/12/2015 A superior territory has a greater-than-average proportion of profitable accounts. This is the critical factor in territory management. Exec Brief #2: Tilting The Playing Field (Action) 6/30/2015 Randy MacLean discusses the secret to sustainable profitability and lays out a proven 6-step strategic road map that will help you take your competitors down. Exec Brief #1: Tilting the Playing Field (The Strategy ) 4/20/2015 Randy MacLean discusses a strategy to shift the profits in the market to your own company. Where Does Your Business Really Make its Money? 11/5/2014 In this 33-minute video, Randy MacLean of WayPoint Analytics shares some of the most important secrets and techniques for evaluating and measuring profit. Why Does Gross Margin (Almost) Never Correlate to Profit? 8/8/2014 Most executives were taught that increasing gross margin would increase profit, yet that's almost never true. Here's why... 7/15/2014 How to recognize the customers most dangerous to your profits |