Santa's Wishes for Distributors

Santa Shares All…. Six Lessons for Distributors

For those of you who don’t know, Santa Claus and I have a special relationship.  It began way back when I was still knee high to a short elf. It seems my grandfather, who was a jolly sort of guy himself, somehow connected with Mr. Claus.  Imagine being 3 or 4 years old and learning Grandpa and Santa were buddies. Special feeling?  You bet. I knew it was real when Santa greeted my Grandpa with, “Hey Red (my Grandpa’s nickname,) how late did you stay down at the Eagles’ Club last night?  If they weren’t pals, how in the world could this jolly red suited man know these details?

Santa knew me by name too. Really! And from that day back in the early 1960s on, Old Santa and I have enjoyed a close and special friendship.  According to Santa, yours truly has managed to make the “nice” list for 5 of my 59 years, but this story is not about me, it’s about distributors.

During a slow point down at the local mall, I managed to grab a few minutes of the jolly old elf’s time.  After our normal greeting and his all too familiar “Ho, Ho, Ho," Santa took me aside and asked me to share a few pointers with my distributor friends.  It was an “everything important in distribution can be learned from Santa” sort of moment. Rather than blast out with bloviating reindeer breath, let me pass on six of Santa’s lessons.

Lesson 1: Segment your customers
Santa said he learned this lesson some 500 or so years ago.  Once he started segmenting his customers into groups; naughty and nice, business picked up.  Today, Santa’s North Pole organization carefully tracks customer behavior and provides services accordingly.


Santa believes distributors must understand customer demographics too.  The customers, who value your service, buy in the right quantities, display the right kind of buying behaviors and allow you to make a profit deserve extra nice treatment.  Santa and his team of elves carefully insure the “nice” boys and girls get better treatment than the rest.  Simply put, distributors can drive more profitable business if they target the right customers.

Lesson 2: Build your own unique brand
The red suit and eight tiny reindeer shtick is part of the whole North Pole Brand.  Flash a picture of a slightly

overweight bearded guy dressed in a red suit with white fur trim and kids anywhere immediately recognize the brand.

Santa and his team of marketing elves first came up with this whole branding deal back in the 1600s.  Since then, dozens of marketing gurus came knocking on the North Pole door; each proposing a different strategy. On a side note, you can only imagine what would have happened if Santa would have taken on that Paisley Nehru Jacket pitched sometime in the 1960s.  Thankfully, Mr. Claus avoided the temptation of flipping his branding message.

For distributors, this means understanding what you’re known for in the marketplace and carefully advancing the message.  Are you known for having a larger stock of hard to find items than your competitors?  Is your team more tuned to technical support?  Are you good at solving logistics issues? Is your counter more knowledgeable than those of your competitors?  It’s time for distributors to stop relying on their supply partners for branding.  In the future, distributors must understand what they’re known for and advance the message.   It develops a strong and loyal following who are willing to partner.

Lesson 3: Adapt to changing customer styles
When Santa first started up, things were different. Boys and girls were known to whisper their Christmas wishes up the open chimney hearth.   Santa had thousands of elves employed at listening posts.  It was mostly tedious and time consuming work.  Later, the kids wrote their wish lists on pieces of paper and tossed them in to the fire with the hopes that Good Saint Nicholas would somehow read their smoke signals.

 For most of us, an annual letter to Santa was something of a tradition.  But today, Santa receives requests via email, instant message, phone calls, and the traditional “snail mail."   Along the way, Santa has constantly upgraded the way he monitors and processes these incoming orders.  He had to shell out some big bucks on technology and training.

Today, distributor customers communicate in ways unheard of just a decade ago. Inside sales teams receive faxes, emails, and EDI communications at the speed of light.


Santa, who keeps abreast of the younger generation, believes some distributors have missed out on the trend toward communications via instant messaging.  Applications currently exist which allow customer instant messages to appear on the inside sales team’s computer screens. This gives customers a new way to communicate with the team and allows inside salespeople to handle multiple customer requests simultaneously.  Further, as customers move toward faster and more sophisticated devices, the jolly old elf believes the trend will grow.

While we’re on the subject of mobile devices, distributors need to evaluate some of the applications designed for speeding up customer selection of products.  Santa tells me that he is working on a new “app” for Christmas 2014.

Lesson 4: Don’t forget your warehouse
It’s no secret that Santa operates from a single central distribution facility located in a remote part of the world.  One would expect that this could be a disadvantage to the fat man and his organization.  However, over the years, Santa has refined his delivery mechanism in order to meet customer needs.  The North Pole warehouse is equipped with all the modern material handling and tracking tools.  Each year literally millions of Red Rider BB guns, electric trains, Easy Bake Ovens and dolls are delivered accurately and on time.

Santa asks distributors to take time to ask how their warehouses today differs from the warehouses of 1983. Does your system employ barcoding, part location, wave picking, or any of the tools which allow you easier throughput and cheaper warehouse operations?

Lesson 5: Never say "no"
Santa has developed a customer service plan second to none.  He has trained his team of salespeople (dressed in Red down at the mall) to never say "no."   Instead, they say, “Santa will have to check.”  There’s a big difference.

One of Santa’s distributor friends once told me this: “I never say no, I just ask; how much you would be willing to pay to make it happen?”  Distributor sales and customer service people need to be trained to offer options when the customer’s original request can’t be met.

For instance, if a customer asks for a part that’s not on your line card, do your customer service reps say “we don’t have it?"  Would it be better if they asked if a substitution can be made?  While this doesn’t seem like “reindeer science," it does provide your organization with additional sales opportunities.

Further, if the customer would like to have something sold by a competitor, do you have a plan?  Some customers want you to take ownership of the issue, regardless of cost.  Santa thinks that’s a cool concept.

Lesson 6: Understand the cost of services
Finally, Santa wanted to point out the rising cost of value-add services.  For eons he assembled dollhouses, set up elaborate train sets and put together back yard swings.   It was pretty cheap to do this back in the 1960s.  Even though the elves and reindeer work for carrots and peanuts, he has been more reluctant to put things together in today’s business environment.  Health care benefits are spiraling out of control up north too.   Instead, Santa pushed the work off to the moms and dads of generally good girls and boys.

He will still set things up for the really, really nice kids; the ones who never (ever) pout or cry.  The medium nice kids have to pay for services.  And, he’s thinking more about cash than cookies.

Santa thinks distributors, now more than ever, need to understand the cost of the value-add stuff they provide.  As a matter of fact, Santa took time to make one last point.  The great bearded one strongly recommends that distributors everywhere read Frank Hurtte’s The Distributor’s Fee-Based Manifesto. He won’t be placing this book under your tree because he still remembers that incident at the golf outing last summer (Santa really does keep track of these things).  Naughty and nice applies to everyone.

But, even the naughtiest distributor can order the book in time for Christmas.
It’s on Amazon.


Now a word from Santa’s longtime friend and veteran of five seasons of niceness:
December is a joyous time of year.  Whether you celebrate Christmas (I do), Hanukkah’s Festival of Lights (many of my friends do) or anything else, I hope you are blessed with time for friends, family and fun.

And, my Grandpa and Santa really were close friends.

Internal Control Systems (PAPAMOSS)

The primary objective of this posting is to critically discuss and explain each element of PAPAMOSS in detail, with some practical examples given to facilitate a clearer understanding. I noticed that there are lack of detailed notes available online nor in books about this topic, so I decided to do some researches and write about this PAPAMOSS’s concept. By the way, this topic is examinable in ACCA examinations (e.g. P1 & P8). Seriously, I hope that this posting can help you to understand the concept better. Kindly share this information with your friends, if you find that this is useful. In addition, if you have any comments which can improve the content of this posting, please do leave a message below.

Internal control systems

                As defined in Paragraph 4(c) of ISA 315, internal control is “the process designed, implemented and maintained by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of an entity’s objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations.”

                     It includes all the policies and procedures (internal controls) adopted by the directors and management of an entity in order to achieve their goals of ensuring, as far as practicable, the orderly and efficient conduct of its business, including: adherence to management policies; safeguarding of assets; prevention and detection of fraud and error; ensuring the accuracy and completeness of the accounting records; and timely preparation of reliable financial statements (Kan, 2013; Kwok, 2005). Auditors generally seek to rely on the internal controls within an entity to reduce the amount of testing on final balances.

              Interestingly, the eight features of an internal control system are popularly known through these two mnemonics words, namely “PAPAMOSS” or “SOAPSPAM”. The eight features are:

Physical control:

This is mainly concerned with the custody and protection of assets such as cash and inventories. It involves tight security measures and procedures to ensure that only authorised personnel have access to the records and assets. For examples, the installation of fences, gates, doors as well as the use of locks and keys.

Authorisation and approval control:

No transactions should be carried out and no documents should be processed, without the approval or permission from an appropriate and responsible person. Approval like signing must be done with consent. Not only that, limits on authorisation should be clearly specified too.

Personnel control:

These are procedures put in place to ensure that staffs have capabilities commensurate with their responsibilities. Kan (2013, p.162) highlights that the hiring of well-motivated competent employees, who have the required integrity for their tasks, will ensure that the control system operates properly. Most importantly, the consideration here should stress on the qualification, selection, training and the worker’s innate personal characteristics. Besides, big companies usually have their own dress code systems which require personnel to wear specific attire or uniform in order to indicate a personnel’s rank or department.

Arithmetical and accounting control:

Persons in charge should ensure that all transactions have been authorised before they are sent for recording and processing purposes. After that, the persons in charge must check whether they got left out anything and make sure that all transactions are correctly recorded and accurately processed. Such controls may include checking the arithmetical accuracy of the records like control accounts, cross totals, reconciliations, trial balance and sequential controls over documents.

Management control:

These are the controls exercised by the management outside the daily routine of the system. For example, overall supervisory controls, review of management accounts, budgetary controls, internal audit function and other special review procedures.

Organisational control:

Kan (2013, p.162) states that a well-defined organisational structure shall show clearly how responsibilities and authorities are delegated as well as identify lines of reporting for all aspects of the enterprise’s operations. A tall organisational structure usually has a narrow span of control where managers can manage their subordinates easily but communication might be distorted due to higher level of hierarchy plus employing many managers is costly. Research organisations normally have these characteristics. Conversely, a flat organisational structure has a wider span of control where managers have fewer time to supervise all their subordinates but there will be lesser distortion in communication as the hierarchy level is shorter plus subordinates are cheaper to hire as compared to managers. This is common in manufacturing industries (Jones and George, 2003, pp.311-312). 

Supervision control:

Supervision by responsible officials of the day-to-day transactions and the recording thereof is an integral part of any control system. For instance, management accounts are reviewed for reasonableness by a qualified accountant. Centralisation might facilitate supervision across management.

Segregation of duties:

Ideally, responsibilities and duties must be separated to a number of people, so that no individual can fully record and process a transaction completely. Furthermore, it reduces the risk of intentional manipulation or mistake and increase the element of checking. Functions which should be separated include authorisation, execution, custody, recording and so on. However, if collusion takes place or if people work together to circumvent the system, then segregation of duties may be ineffective as this situation often making fraud difficult to detect (Gray and Manson, 2011, p.282).  

Conclusion

            It is noted that significant deficiencies in internal controls shall be communicated in writing to those charged with governance in a report to management. The written communication should include a description of the deficiencies and their potential effects. ISA 265 requires auditors to find out the number of identified deficiencies and their relative significance. Auditors may also provide suggestions for remedial action.

References

Gray, I. and Manson, S., 2011. The audit process: principles, practice and cases. 5^th ed. Australia: South-Western Cengage.

Jones, G.R. and George, J.M., 2003. Contemporary management. 3^rd ed. New York: McGraw-Hill.

Kan, E., 2013. Audit and assurance – principles and practices in Singapore. 3^rd ed. Singapore: CCH.

Kwok, B.K.B., 2005. Accounting irregularities in financial statements: a definitive guide for litigators, auditors, and fraud investigators. Aldershot: Gower Publishing Limited.

Admit it, Your Company Newsletter is BORING!

Distributor Newsletters, Naughty or Nice—You be the Judge
We’ve been analyzing a bunch of Distributor newsletters and blog sites lately. Yep, just like Santa, we’re quietly watching you to see who has been naughty and who has been nice.

We’ve learned a valuable lesson. Watching nice boys and girls at work is fairly boring. Poor old Santa probably gets much of his weight problems from eating while he’s bored stiff. There’s nothing exciting about nice.

Have we been sniffing Christmas tree needles again? No, there is a point to this.

The Nice Distributor Kids fill their newsletters and blogs with product facts, specifications, and catalog cut sheets. This is what the customers are supposed to want, right?

Well….we don’t think so.

Reading through the product spec sheets disguised as distributor newsletters is so dull, even Santa would find himself chugging down a dozen cookies and warm milk to get through them.



Customers who are probably only marginally interested anyway are definitely going to give them a couple of seconds before their finger starts hovering over the delete key. Add in another stock picture captured from a catalog and they’re going to laugh with glee as they send your information twirling down the toilet into their trash file.

People want to be entertained. People want to be amused. People want to get mad, sad, or feel something in response.

And now a word from Santa’s Helper, Elfy Obvious: Customers are people too!

Finally, a word from the Jolly Old Elf himself---
Include your personality in your blogs and newsletters. And, if you don’t have a personality, ask Santa to bring you one.

And, speaking of lists; Santa probably won’t be brining you a 2014 business plan. If you don’t have a plan for a marketing newsletter, better add it to the master plan.


Now without further ado, here is a poem to kick off the Holiday Season:

Twas a mid-week morning, quiet with peace,
When Assistant Elf shrieked, “good gravy, look at these!”
Fearing the worst, I ran to her desk,
“This newsletter is boring, who would send such a mess?”

She was right, just like always, (since she’s typing this up,)
But this business is just not full of much fluff.
The newsletters, blogs, social media and ads
Just don’t pack a punch with reader ladies and lads

You see we’ve been searching and researching the net,
Through the email, Twitter, Constant Contact we get,
And what we’ve been finding is tough to admit,
Is facts, and numbers, and boring bull-- hockey.

Where’s the fun, where’s the humor?
Let’s shake this old rumor
That distributors are dull, lifeless and boring
Let’s keep them reading, engaged and exploring!

“But why would we do this?” the masses cried out,
We’re serving our customer, no need to branch out!
The truth is you’re making it on hard on yourselves
Personality is easy, it’s just not on your shelves.

Give your readers fun news, along with the stats
Help them get to know you beyond just the facts.
Run a contest, tell a joke, give them something to treasure,
They’ll find value in your antics, while hard to just measure.

Nice elves give stats, stock photos, and codes
Naughty ones do too with stories and odes
Keep your readers from hitting the dreaded DELETE
Give them something they’ll want to “Like” and re-Tweet.

Santa will expand on this for good girls and boys,
In the following weeks, we’ll consider them toys.
Examples of what makes us shudder in fear,
And how to exchange them for messages worth cheer!

If you want to get working, but don’t know how to start
Just drop us a line, and we’ll tear it apart.
Your blog, your newsletter, and all in between
I’ll be the gentle one, Assistant Elf is quite mean.

Check out Assistant Elf dancing through our office!

Santa says to remember our Holiday special running through the end of this month!  Get a printed copy and shareable copies of Frank's book on Annual Planning.

One on one telephone coaching session with Frank is also included for $300!  Appointments are filling up, grab a spot while you can!

Who's the Bank?

Distributors as Bankers?

High interest rates must be on a lot of peoples’ minds these days. During the past month I have received several emails asking my opinion on the distributor’s role as the extender of credit; the organization providing some of the funds necessary for their customers’ operating capital.

Let’s look at the current situation: customers who expect extended terms seem to be multiplying like cockroaches in a roadside diner. In the good ole days, customers paid their local supply house distributor at the end of the next month. Some of us even offered special discounts for those who paid by the 10th of the month.

Somewhere in the late 1990s, a number of large companies (reportedly led by GE) unilaterally made the decision to pay their local distributors in 60 days rather than the normal 30 days. The conversation went something like this:
“The time and effort required to process your invoices takes us longer than 30 days. So, we’re going to start paying in 60 days. If you want our continued business, you’ll accept this policy.”

What’s a distributor to do? This big company represents important revenue; the interest rates were/are relatively low, what the heck- why not just absorb the cost of the extra days?

Fast forward through a decade and a half, and we find the typical distributor’s A/R portfolio contains dozens of companies paying in 60 days and a few who pay in 90 or even 120 days.
(For those of you shaking your heads on the 120 day thing… there are whole industries where 120-day payment is standard.)

Regular readers know I am a big fan of Abe Walking Bear Sanchez, who promotes credit as a business attractant. Mr. Sanchez suggests credit costs are just part of doing business.
I agree, however, I see a shift going on.

More and more customer organizations are coming up with excuses to pay under extended terms. The list of excuses is long but here are a few we have heard:

“Our projects take several months to finish so we don’t pay until the project is complete.”

“We pay our suppliers when we get paid from our customers.”

“All of our A/P work is done at our headquarters location, so it takes us extra time to handle your invoices.”

“Our company only does business with 60 day terms.”

At the same time, distributor supply partners require straight 30 day payment. As customers continue to push for longer payment terms, distributors lose what my dad’s generation used to call “the inventory float”. This was the time he had to sell product before he had to pay his supplier. He often made large purchases and sold them on a cash basis within days of receiving the inventory. The margins generated helped cover the cost of the inventory.

Today we see this “float” going away.

As long as interest rates remain low, the costs of supporting the inventory costs for an extra 30 or 60 days are relatively insignificant. However, an uptick in interest rates could create a negative impact on the distributor business model. And, the impact affects not only stock sales but sales made directly from supplier to customer.

As we move forward (and watch interest rates available to distributors) it may be time to examine the following:
• Is it time for lending institutions to take a new look at how they value distributor A/R numbers? Many currently seriously discount any accounts over 60 days. In a world where large companies are dragging out their payment days, is there any magic in the 30 day number?
• Should suppliers change the terms on products sold to distributors? Does it make sense for distributors to finance the manufacturer’s gross margin? Do supply partners realize how this spread in payment might impact a distributor’s ability to finance growth?

Your thoughts?

Why Do Salespeople Need an Annual Plan?

I’m a Salesperson, for crying out loud, why do I need an Annual Plan?

Some will do just about anything before planning.
It takes more than just adding it to the top of your "do do" list.

Let me talk directly to my friends who fill the critically important role of Distributor Sales.

First, I consider myself to be a member of your brotherhood.  I know it’s a tough job.  Day after day, you load in to your vehicle, had out to face down angry customers, smart-alecky purchasing guys, and unsavory reps from vendors.  You trudge through rain, sleep, snow and traffic that would wilt the heartiest of letter carriers.  If no one has said it recently, thanks for what you do. 

Salespeople are the backbone of the Distribution Industry.  Now don’t you feel better?  But here comes the part where I explain precisely why you’ve got to make time for something many find distasteful.  Bear with me… I promise it will only take a moment.

Regardless of what you think, Annual Planning isn’t just for the guys up in corner offices.  Management needs to plan for financial ups and downs.  They need to worry about managing cash flow, maintaining the right inventory, measuring staff needs and budgeting for the coming year.  And, no doubt you will be asked to share in the fun.  Most of you will be asked to assist with sales projects.  Some of you will be assigned to being part of annual physical inventories.  A few might even be handed a paint brush as part of an end of effort to spruce up the office.  But there’s more for a salesperson to think about. 

Customers aren’t forever

Reviewing many distributors in a whole lot of industries, we’ve learned customers aren’t forever.  Typically, you can count on losing 10% of your “base” business every year to things like plant closings, mergers and acquisition activity, economic shifts and changing needs.  Simply stated, in order to stay even, you have to grow business by 10 percent.

A good annual plan would include evaluating customers on your list who may be on the decline.  Understanding where this loss will come from will direct your thoughts on call frequency and use of your time.

At the same time, determine which accounts are poised for growth.  Sometimes this has nothing to do with you.  If your customer has an expansion pending, your numbers may improve even without your special efforts.  But, working to increase your presence at a growing account pays larger dividends to your sales number.

Special pricing and supply contracts

Special pricing agreements have grown in importance in distribution.  In some lines of trade (like the Electrical and Automation business) they have literally exploded in use.  We tend to create them and forget them.  An annual plan would include reviewing the agreements for inconsistencies. 

Here’s how it works, a customer indicates they are going to buy hundreds widgets for their new project.  You provide them with a pricing agreement but sales of their new machine never took off.  But, when they buy a single part, they get the special price.  This fact cuts into your commission check and sets the wrong kind of expectation for the future.

A good plan includes candid conversations about raising the price to a more acceptable level.  While this may not be comfortable, we have discovered distributors who present massive price increases (6+ percent) often irritate the customer.  You can always lower the price later if and when their quantities grow. 

Pushing the envelope further, do you have any accounts where a special price agreement might give what one client calls “the new exclusive”?  Formulating special pricing agreements, locks out competitive distributors who handle the same product lines.
Click here for a brief tutorial on special pricing agreements

Personal Positioning with Supply Partners

We all have them; friends and allies who sometimes can make our job a bit easier.  They tip you off to opportunities.  They give you insider information.  They allow you to make more money for yourself and for your company.  And, sometimes they are easy to overlook.

Now is the time to plan a meeting with each of these people to talk about their goals and plans for the next year.  Chances are any manufacturer’s salespeople need extra details to feed back to their headquarters group.  Investing in a planning meeting will strengthen your relationship and create future opportunities.

Planning for information storage and retrieval

A lot has happened in the world of distributor data.  CRM systems spring up everywhere.  New ERP operating systems are being sold daily.  New phone apps, smart phones, tablets and internet availability nearly everywhere make it hard to keep up with things. 

In some instances we sales types have been left with more options, but never a clear cut path to bringing all the data together in the way we can use it.

I recommend spending some time thinking about what customer information you need on a daily basis.   We could do it just about any time, but end of year is a great time to plan and begin your implementation.  What information?  How will you add to it?  Where will you keep it?  What’s important for you versus requested/required by management?

Calculate the Gross Margin potential per call

Plan by understanding the gross margin potential required attain your 2014 goals.  Selling is an emotional endeavor.  We all have our favorite customers.  They appreciate the work we do, they greet us warmly and make the people side of the job pleasant.  But, are they big enough or likely enough to warrant our time? 

I have a spreadsheet used to calculate the gross margin potential for sales calls.  Shoot me an email; I will share it with you.

There’s more but….Lot’s more…

This message might run for another couple thousand words, but nobody would read it.

Let me sign off with a list of topics you need to think about:

·       Sales Skills – What are you doing differently today than five years ago?

·       Product Training – What are your strengths and weaknesses?

·       Specialists – Are you getting the full bang for the buck from the ones you work with?

And my favorite

Vacation, relaxation and play – Work hard, play hard.  Have you pondered loading the gang into the old family trickster and hitting the road for Iowa?  If your kids haven’t seen the sun shining over 13.7 Million acres of corn, they may be missing out.

Don't forget about our planning special running through the end of December.  It's a great time to help yourself and the nerds on your team.
Yeah, you read that right!  

Get Excited, it's Time For...Annual Distributor Planning!

Annual Planning for Distributors

It’s November. The Midwestern Iowa leaves feature Technicolor rainbows of colors; bright red, deep orange, a thousand shades of yellow. A bit of warmth lingers, but Thanksgiving, December, and the Holiday season rapidly approach. Two painful realities of the season loom in the distance - yard cleanup and annual planning.

As I jot down these few words, I feel the approaching pain of a future Sunday afternoon manhandling a rake around the property. Some pay a neighborhood teenager to handle the raking. But it’s hard to find an $8.00 an hour surrogate for End of Year Planning. Planning needn’t be the dreaded task hanging around the corner. Join me as we remove the pain out of the process.

Start early. Many of us don’t dig into the task until the last minute. A few of us dread the seemingly gigantic nature of the job so much, we procrastinate into next the year. I know people who move paper clip sorting to the front and center in order to excuse themselves from the dreaded details of planning.




Break planning into smaller bit-sized (and delegable) pieces. Here are a few bite-sized bits of the annual plan:
• Inside Sales/Customer Service
• Marketing/Events
• Non-Selling Expenses
• Demo/Equipment
• Warehouse/Delivery
• Employee Benefits
• Employee Training

Think, is there a lead person in the Inside Sales Department who might provide you with a rough plan for improving the level of customer service? Could a delivery driver provide feedback on how logistics might be streamlined? Why guess, why assume the burden of everything? Can your marketing person provide insight (cost and projected dates) on desired events? Delegate the gathering of information.
Your accounting department can provide you with a list of expenses for things like rent, utilities, phones, computer lines, taxes and insurances. Push things a step further, ask for best ideas of escalations for the coming year. While nobody has a totally reliable crystal ball, they can give you strong estimates for the future.

Provide your teams with a common format. Have all cost oriented information provided using the same breakdowns as your monthly financials. Use a spreadsheet which can be easily be combined into a final document.

Photo courtesy of
www.keepcalm-o-matic.co.uk

Evaluate your team – strengths, weaknesses and areas for improvement. Managers and supervisors with direct reports need to take a physical inventory of our most precious commodity – people. The plan should include: evaluations, planned compensation adjustments, training needs and overall skills rating.

Sales Forecasting is the big kahuna of planning. For distributors developing a solid plan for future sales and gross margin is the most critically important step of planning. We recommend using what we call the Who, What, Why approach to forecasting. Here is a short synopsis:
This plan is specific and manageable throughout the year and requires only a minimum of effort to set in place. Here is a simple breakdown:

1. Salespeople are provided with their customer sales for the previous year broken into product categories.

2. Salespeople review each account (who) and estimate future growth or shrinkage (what) by product category. As they review the numbers they answer the question of why this number will grow or shrink – things like one time projects, new products specified, competitive issues and the customer’s own growth are considered.

3. The numbers are tallied by salesperson and combined into the final plan.

4. Management reviews and compiles the numbers with their salespeople. Many sales guys prescribe to the old tenant of “Sandbagger or Loser” and submit dismally low projections. This must be addressed on an individual basis. The process allows for coaching, mentoring and managing, but that’s another article.

Providing each salesperson with the same formatted spreadsheet and instructions for compiling the date makes the whole procedure easier on management. And, in our experience, a salesperson with the numbers and accounts already laid out can provide pretty good information in just a couple of hours.

Final words
Would you invest in a business that had no projections, forecast or operating plan for the coming year? Why then do so many distributors simply glance over the whole concept of building an annual plan?

If you have a planning process, get started early, involve others and make yours the best ever.

If you don’t have a process, allow me to recommend a short easy to follow workbook: The Industrial Distributor Annual Planning Workbook. It’s on Amazon here. 

And if you would like to really jump start your planning process, River Heights is offering special phone-based consulting during the month of November and December for only $300. It’s a one hour question and answer period with our “Fearless Leader” and Master Planner, Frank Hurtte. Here’s what you get:
• A copy of Frank’s workbook in printed format
• The workbook delivered in Word format (so you can share with everyone in your team.)
• A collection of distributor friendly planning forms and other documents developed by River Heights Consulting (why reinvent the wheel.)
• An hour long one-on-one coaching session with Frank Hurtte.

Drop us a line if you want more information: info@riverheightsconsulting.com
After all, annual planning is NOT just for Dinosaurs!

Is Territory Expertise Your Main Tool?

Shouldn’t Distributors be Territory Experts?

Let’s talk selling; not the normal distributor to customer kind pontificated on by consultants everywhere.  Instead, I suggest we explore the backwards sale aimed toward our supply partners.  We never talk about it, but I think every now and again we need a refresher.

We distributors sell our value to supply partners in a number of ways.  For example, the gigantic catalog houses pitch their state of the art logistics team and their capability to get the manufacturer’s product from Port A to Point B in very short order.  For some mid-sized distributors, the supply partner sales story contains tales of supply contracts that “deliver” the MRO business of Fortune 500 manufacturing firms.

Knowledge-based distributors in the automation world tout the solution building prowess of highly trained sales engineers.  The implied story is this: we can create new and wonderful applications for your product at OEMs who will push your product throughout the world on their machinery.

Back in our dad’s generation everybody tossed in the credit risk distributors carried on behalf of their supply partner friends.  My own dad loved to stretch the bounds of credit risk by talking about the number of folks he helped out by giving them credit when they started out.  He crossed race and culture boundaries that big companies wouldn’t way back in the 1950s and created loyal customers for his suppliers.

Territory expertise is the Number One Value

Distributors select lots of value creation points for their conversations with suppliers, but the most common selling point is their extensive territory expertise. Distributors join in an almost Gregorian chant each verse carrying a common refrain.  I know my territory.  Sign us up if you want to cover the southern shores of the Great Gitchegumee.  Nobody knows the West Overshoe Market like our team.

With all this talk, wouldn’t it make sense for distributors to really know their territory?  And, this includes not only current customers but the ones you plan to penetrate in coming years.  There may even be a few you have made the decision not to pursue. 

Can you produce an expansive list?  Armed with all this hyperbole around territorial expertise, why do most distributors lack some of the basic tools?

Tool One: Manufacturers’ Directory

Companies compile and sell lists of manufacturers (by state, region, or otherwise.)          
Available in either book or electronic format, these directories typically show the following:

           

       Company Name

Product Manufactured

SIC/NAICS Code

Number of Employees

Location

Company Ownership (Public, private, subsidiary)

Executive Contacts

Let’s explore a hypothetical situation; suppose you want to quickly market a product to the buggy whip industry in your territory.  The information contained in the manufacturer’s directory allows you to quickly compile all the Buggy Whip manufacturers in your territory.  Armed with the cross reference, we discover NAICS 316998 (or SIC 3199) contains Buggy Whip makers.  In short order, we can easily identify all the prospects in our territory.

Once we had our Buggy Whip maker list, we could easily call the sales offices and companies too small to deal with via the number of employees.  A Buggy Whip maker with 300 employees is a reasonable opportunity.

The directory would allow us to know if a Buggy Whip company is part of a larger organization, for instance a division of Kraft Foods, General Motors or a stand-alone private company.

I don’t put much stock in the names or email addresses provided by these services.  Experience dictates that any sizable target will have a dozen gatekeepers between you and Mr. Big, but your team can get through the gatekeeper’s fence (or at least they should.)

These directories are a must for prospecting, important for developing new territories, and critical for building a marketing plan.  So let me return to my previous question.

Why do most distributors lack this most basic of tools?

These things don’t cost thousands of dollars.  The paper versions sell for under $250 per state.  Used copies appear on Ebay on a regular basis for under $25.

If you can’t tell, I recommend you spring for one.

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