Recognizing High Potential Accounts for Greater Profits
•sales practices •Wholesale Distribution Industry •sales management •sales management styles in distribution •High Potential Accounts (HPAs) •High Volume AccountsThursday, November 17, 2016—Because a company's operating budget comes from gross profit, protecting gross profit is the most important responsibility of executives.
In this video, WayPoint president Randy MacLean urges businesses to become aware of high potential accounts that drive most of the profitability. These accounts are key to building a replacement gross profit strategy; essentially, by replacing unprofitable gross profit with profitable gross profit by trading customers.
What are high potential accounts?
The concept of high potential accounts is an important tool to help sales people understand where to do the work. These are accounts that on their own, individually, can affect the bottom line of the business, the success, and the cash flow. Recognizing the high potential accounts is extremely valuable, because they have the potential to make you a lot of money. And, if they are efficient, growing your business in these accounts leads to faster and greater profits (up to six times) than with average accounts.
Subgroups of high potential accounts are as follows:
Profit Drain Accounts – These generate a lot of gross profit, but their expense rate is higher than their gross profit rate. This leads to losing money, and the more business you do with the account, the more you lose. However, these accounts provide one of the best opportunities to renegotiate and reduce cost to serve, while maintaining gross profit. A reduction in losses will have an impact on the bottom line.
High Value Accounts – These accounts have an above average gross profit production and a below average expense rate. Some are well below the company's established average expense rate for making a profit. Increasing sales to these accounts means an exponential increase in profits, compared to average accounts. These accounts are also valuable as templates for the kinds of customers you should attract as replacement gross profit accounts.
Analyzing accounts from this perspective narrows the focus of salespeople to finding accounts that make an instant contribution to the bottom line and allows the freedom to lose accounts that cannot be made profitable.
For more information about Randy MacLean, visit: www.waypointanalytics.net
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