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How Distributors Should Rethink Their 2017 Sales Growth Plans

Bruce Merrifield, President — Merrifield Consulting

•QPM •Quantum Profit Management (QPM) •business math for distribution •cost-to-serve math •LIPA •line-item profit analytics in distributionRethinking Your 2017 Sales Growth Plans

Are Your 2017 Sales Growth Plans Guided by Dated Assumptions?

There are some long standing assumptions that many businesses rely on year after year when creating plans for sales growth. One of the oldest is that all expenses are fixed. Another is that incremental new sales and gross margin dollars flow through to profits and earn more rebates at year end. Or how about the idea that to get more sales all you must do is get more reps to make more calls on more accounts, using selling scripts for products from key suppliers.

If you're ready for some new thinking, read on.

Learn Why Macro and Micro Numbers Are Flashing Red

According to association long-term (15+ years) financial data, 90% of all distributors average only weak returns. The buy low, sell high, sell more, and pay fair wages approach to working hard and lean stopped working long ago.

Waypoint Analytics uses line item profit analytics to dig deep into the numbers, and Waypoint users learn both bad news and good news about their customers.

The bad news:

• 80% of costs are variable (not fixed)

• 70% of all line item events are profit losers

• 65% of all orders are profit losers

• 80% of all customers either break even or are losers

• 1%+ of big customers are super-losers, averaging small gross margin dollar lines and orders

• 50% to 80% of all sales territories are profit losers

• Small customers consume more (incremental) service activity cost dollars, creating losses

The good news:

• 20% of customers produce 150% of profits to pay for all the losing activity

• Around 5% of accounts are big, profitable, innovatively growing, and looking for supply-chain solution partners. Why not you?

How to Update Your Sales Growth Assumptions

First, sort your accounts into three service cost model categories: Enterprise/Team; Standard/Rep-Covered; and Small Account. Then, use an innovation metric like 100% of customers will be profitable.

To achieve this metric, use cost to serve buying statistics to fix previously hidden high activity costs for low dollar picks and orders. This is how you can turn lose-lose buying activity habits into win-win. You will retain and earn more share of the most profitable customers.

Also, freeze your full time equivalent employees (FTEE). With fulfillment slack from order consolidations you can redeploy people into processing large account sales wins.

And don't forget to measure both 12-month trailing gross margin dollars/FTEE and profit dollars/FTEE. The first will grow, the second will soar. Why? How? Watch this short video clip for more answers.

For More on Customer-Centric Growth Solutions:

Go to Waypoint Analytics for a demo on their subscription web service and line Item profit analytics (visit www.WayPointAnalytics.com).

Attend the Advanced Profit Innovation Conference (visit www.APICConference.com) on April 20th and 21st in Phoenix, Arizona. See you there!

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For more information about Bruce Merrifield, visit: www.merrifieldact2.com


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