www.quantumprofitmanagement.com Quantum Profit Management
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 distribution

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Rethinking 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!

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

The 7 Areas That Need Your Focus (brief)

The 3rd of 3 lists defining the markers of Distribution companies outpacing their peers.

An Analytical Boost to Service Excellence

Bruce Merrifield and Randy MacLean discuss the handful of key customers in your business, and how to keep them happy and loyal.

Beyond Business Intelligence

Randy MacLean explains the differences in business intelligence systems, and how to know what you're getting with each kind.

LIPA: Prophet of Customer Needs

See how implementing LIPA can give you the bandwidth to be more accommodating to your customers with analytics-based service excellence

Getting a Deeper Understanding of Costs

Randy MacLean and Bruce Merrifield of WayPoint Analytics discuss different levels of cost analysis, and why deeper analytics can bring much greater benefits.

Optimizing Salesforce Pay Through Deep Data Analysis

Companies are developing more and more sophisticated approaches to sales compensation and here Bruce Merrifield and Randy MacLean examine the trends.

Managing Product Line Profitability

Managing Product Line Profits shows how operations can have a significant impact on net profit and examines Peak Internal Profit, accumulated profit and more

Gross Margin Percent: A Poor Indicator of Profitability

Many naturally occurring, high gross margin percentage accounts and high gross margin percentage SKUs are operating profit losers.

The Advantages of Segmentation

A discussion of the benefits of segmentation and how this approach can help distributors achieve far greater levels of profitability.

How to Turn Big Data Into Big Profits!

Top companies like Amazon can leverage big data to predict consumer buying habits. Bruce Merrifield discusses how you can do this too!

Gross Margin Percent: A Poor Indicator of Profitability

Most distributors have naturally occurring, high gross margin percentage accounts and high gross margin percentage (small dollar pick) SKUs.

Increase Profits: Rank Customers and Act Accordingly

Here is a case study in which the lowest gross margin percentage niche was the most profitable and the highest gross margin percentage was the loser.

Discussing the Enterprise Account Selling Model (#3)

Continuance of the Enterprise Account Selling Model video series. Refers to a preceding video. Drawn from Bruce's presentation at APIC on March 1, 2016.

Discussing the Enterprise Account Selling Model (#2)

A continuation of the discussion between Bruce Merrifield and Randy MacLean over Bruce's Enterprise Account Selling Model (part 2).

Discussing the Enterprise Account Selling Model (#1)

Bruce Merrifield and Randy MacLean discuss Bruce's Enterprise Account Selling Model, as presented at APIC on March 1, 2016.

Getting Your Salespeople to Negotiate Smarter

Using the negotiation process to achieve CTS savings, allowing you to offer your customers lower prices while leaving the table with a larger profit.

Cost-to-Serve Math: Why Gross Margin May Fool You Every Time

This video by Bruce Merrifield and Randy MacLean describes why you can't rely solely on gross margin to determine profitability.

The Changing Face of Sales

An in-depth look at some historical limitations to sales compensation, and why those factors no longer apply with the availability of LIPA.

Gross Margin Fixation

A fixation on gross margin – without looking at cost-to-serve (CTS) – has blinded countless distributors and limited their ability to achieve profitability.

Amazon Tactics: Know Your SKU Profit Winners and Losers

See why your most profitable 200+ items are typically popular commodities with lots of picks for lots of customers with a high average sales dollar per pick.

A WayPoint Client and Whale Curve Success Story

Learn how this distributor was able to massively ramp up its profitability even as it lost many of its customers.

Cost Structures: What Makes for a Good Sale?

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

Randy MacLean talks about the emergence of a new sales strategy.

Why You Should Sweat the Small Deliveries

A discussion on how little extras can sometimes add up to a lot of infrastructure cost in wholesale distribution companies.

Increase Innovation with a Rule and a Tool

Learn how to boost your company innovation IQ by adopting the Anti-Nitpick Rule and the Wheel of Learning Tool.

It's Not Who You Think It Is

Randy MacLean discusses key profitability metrics for QPM.

Prioritizing Your Customers

A discussion of the perils of a cookie cutter approach when it comes to sales and service in the wholesale distribution industry.

How Customer Segmentation Unlocks Hidden Profits

Bruce Merrifield of WayPoint Analytics teaches the importance of customer segmentation and the insights it can offer your distribution company.

Quantum Profit Management

Randy MacLean introduces the core principles of QPM and illustrates how it's the most effective way to run a business.

The Benefits of a Cost-to-Serve Math Program

Have you had trouble conveying the importance of CTS to your team? Learn how this course provides an affordable and convenient educational solution.

Making Money by Giving Away Product

Bruce Merrifield and Randy MacLean discuss profit strategies for wholesale distributors that will raise their cost-to-serve and profits.

Webinar: How to Create a Sales Compensation Plan (pt 2)

Webinar: Quantum Sales Compensation Plan Part 2

Webinar: How to Create a Sales Compensation Plan (pt 3)

Webinar: Quantum Sales Compensation: Designing Your Plan

Webinar: How to Create a Sales Compensation Plan (pt 4)

Webinar: Quantum Sales Compensation for the Wholesale Distribution Industry: Launching Your Plan