Raking Leaves vs. Annual Planning

Getting those pesky leaves before snowfall.

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 make this time of year go by quickly. 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 of Year End Planning until the last minute. A few of us dread the seemingly gigantic nature of the job so much, the procrastination pushes us 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. 

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.

We also offer more personalized assistance and one on one training calls.  Email today and let us put together a winning plan for your team!  

We need more sales calls, but it’s not happening!

Business levels are flat (at best) and sales managers are clamoring for more sales calls.  All across distributor-land, sales managers are pushing their teams for more productivity.  They reason more sales calls equates to more discovery, more opportunities to quote and greater visibility with customers who for some reason or another share their business with several suppliers.

The pressure is on.  Ranging from kind requests to outright threats, sales managers are pushing for more calls.  In cases where the distributor uses some form of call reporting (CRM or otherwise), the reports are getting greater scrutiny and results aren’t pretty. 

Under pressure to create a better looking report, salespeople are counting drop by visits with no actual customer contact as a “sales call.”  Under the heading of a good example of terrible selling behavior, one reported sales call consisted of driving up to the guard shack of the customer and asking for the head of maintenance.  Since the seller had no appointment and lacked the name of the individual, they were summarily turned away.  Another slightly more credible example of a sales call involved the sales person making a delivery to the customer’s facility where the only contact came with the receiving clerk.  Clearly, this type of behavior does little to impact the bottom line.

Why aren’t we seeing more people?

I believe there are a number of reasons that our salespeople are not seeing more people.  But before I rattle off the reasons, allow me to say I don’t believe sloth has anything to do with the situation.  Lack of skill, sometimes.  Bad habits, probably.  Deliberate laziness, no way. 

Finally, here is my list for why salespeople can’t improve their number of calls:

• They fail to plan their time.  As sad as it seems, on any given Friday afternoon many can’t tell you what they are doing next Wednesday afternoon, unless that day happens to be vacation or the next sales meeting.  Planning is both a skill and a habit, both of which can be improved.
  
• They fail to optimize travel times.  Only a few of the sellers we know have territories compact enough to ignore travel times.  The guys in secondary markets drive 50 miles to make a sales call without considering stops along the way.  Folks in big cities cover less distance, but the effect is the same.  Only a rare few plot their day in a way that offers maximum time with customers.
  
• They fail to make appointments.  Could be a habit, could be a skill or it could be their customers just plain don’t want to see them.  Getting appointments are hard (not impossible) to make these days.  A lot of folks have just plain given up on making them.
  
• They get sucked into mundane tasks.  Some return to the office to follow-up on trivial orders, others drop what they are doing to immediately respond to a quotation and others get hung up on “baby sitting” customer orders.  A few simply don’t trust their support team enough to carry out even small tasks.  A good many are control freaks who feel good about controlling more than they should.  While all of these might be important, they need to maximize team involvement.
  
• They spend too much time to responding to customer emergencies. 
  Technically oriented sellers often fall into a purely
  
  reactive mode of operation.  They get personal satisfaction from solving customer emergencies and customers love them for the work they do.  Sounds great, except that when times are slow, they spend more time instead of less time with each emergency.  Further, some salespeople don’t measure their value.  They spend inordinate amounts of time with low volume, small potential customers.
  
• The situation is complex and requires individual coaching…Reviewing the list, it’s pretty clear there is no one magic bullet fix.  Out of a half dozen sellers there may be four or five different situations.  This is where the sales manager earns their keep as a manager and coach.

Over the years we have devised a plan for assisting sales managers understand and respond to individual weaknesses effectively.   As with any type of long-term improvement, it takes time and a bit of effort.  

Here is the simplified version of the plan:

• For the next 6-8 weeks set aside a time on either Friday afternoon or Monday morning to review each seller’s activities planned for the next week.  Experience shows this takes about 20 minutes per salesperson.  Let them know this is not a permanent procedure but a 6-8 week coaching assignment for the manager.
• Specifically log the data as to where they plan to go, who they want to meet, what they plan to discuss, whether an appointment will be set and the proposed date of the call.
• During the same meeting, review the results/details of the last week of calls.  When possible match the planned week to the actual results (a week later).
• Look for the following:
• Issues with scheduling.  Are they really planning ahead?
• Issues with setting appointments.  Do they need some coaching here?
• Emergencies which took them out of the field.  Are they justified or just control issues?
• The products, services, issues discussed.  Customers don’t want their time wasted.  Are the products properly selected?  Are they bringing the right sales materials?
• Identify individual issues which need skills training, coaching or management.

Coaching works better when individualized…

They say it takes 30 days to break a habit and longer to develop a new skill.  Don’t expect instant perfection.  In fact, you should expect improvement sandwiched between in a bunch of returns to the old habit.  But, don’t let your team wear you down.  Improvement will come.  It takes a while but our work indicates a couple of months spent today can change things for a long time.

Finally, we would love to chat about your unique situation…

Drop us a line or give a call.  We would love to hear about your situation.  We have plenty of resources available and a good many of them are… free.

Looking back at our blessings

Looking back at the nearly 200 articles posted to this blog, most were designed to provide insight,

suggestions and training for distributors and their supply partners. Our mission has been, and continues to be, creating a catalyst for better ideas within the distributor channel. But, for just a couple of minutes, allow me to take a look back in time.

We are celebrating out 10th Anniversary
River Heights Consulting was formed ten years ago on November 13, 2005. After many years of consideration and sleepless nights, I decided to take my gathered knowledge and skills to launch out on my own. It was my long-time dream to consult in the distribution world.

When I first launched, I had no clients, no prospects of clients and very little idea as to how to find new clients. For a couple of days, I felt like Jack from Jack and the Beanstalk, somewhere deep within my consciousness I heard voices say, “Jack, you traded the cow for these three magic beans? How stupid of you…” But I was blessed. A few days following my resignation, I received an unsolicited call from Phil Allen of Grace Engineered Products who wanted to be my very first client. I am happy to report Grace is still a client. Blessings continue to flow.

During the first couple of years, it was tough connecting with new clients. The good news was that it was fairly easy to find organizations where I could provide really strong value.  They wanted to hire me!  The trouble was, they wanted to hire me as an employee, not a consultant.

It seemed as though every baby-boomer with any level of success “put out a shingle” and called themselves a consultant. At least until somebody offered them a job. My wife encouraged me to stay the course. Again, I was blessed. At some of my most discouraging times, a new client would join the River Heights Consulting family. The family grew and now at the end of ten years, we are maintaining that momentum. With each new client, I have learned something.  I have learned about their business, how to be better at my own business, and how to help others overcome obstacles and prosper.

Over the past 10 years, River Heights Consulting has:
• Interviewed over 1,000 distributor executives (we quit counting at 800 about five years ago). Each one of these folks generously shared the issues facing their businesses. In many instances, they talked openly of their successes and the pitfalls they experienced along the way.

• Interacted with some of the top thinkers in the wholesale distribution. The folks who run distributor associations really do have a handle on the issues facing wholesalers. They shared, they bounced around ideas and they generously assisted with research.

• Written five and a half books. Why the half book? Well, there are a few that are near complete but need either some final editing or a bit more research required to move them from mildly interesting to worthy of the readers' time.

• Authored over 400 articles. This has put me in touch with some world-class editors. They helped me improve my writing skills. Don't forget, I am an engineer by trade, so writing was never a strength. These people were patient with me, offering amazing tutorials.  Plus, they taught me to not be afraid of putting some of my personality into the work.  "Frank speak" is a real thing around here.

Since many people want to know, here is a list of the work we have performed.
• Executive coaching. In spite of claims made by others, I don’t believe any one course can provide the background needed to be a top-level distribution executive. We work one-on-one with great people to help them be even better. We play devil’s advocate and challenge their decisions. We ask dumb questions and demand smart answers. We help them refine ideas.

• Sales training. We do training on target-based selling, Value-metric selling and solutions selling. We often ride along with salespeople to provide them with a bit of coaching as well.

• Speaking. We have been honored with the opportunity to speak to groups all over the world.

• Distributor Advisory Councils. This is one of my personal favorite tasks. River Heights Consulting has conducted dozens of these meetings and helped suppliers build a better relationship with the wholesale partners.

• Rep. Council Meetings. Sales Agencies, AKA Rep firms, are part of the landscape. They provide real value to the channel. One rep recently pointed out a notable fact. According to Forbes Magazine the average tenure of a rep in their market is 22 years versus just over two years for a salesperson working directly for the manufacturer.

• Strategic Planning. Without a plan, it’s hard to grow. We’ve had a lot of fun helping all kinds of organizations refine their vision for the future.

• Customer Focus Groups. The voice of the customer is powerful. Understanding why people buy from you is as important as any fancy sales strategy.

I could go on and on with this list. I know I have skipped over some important stuff. I suspect in another ten years the list will be even bigger and better. So allow me to close with the most important point.

We have been blessed with literally thousands of friends, people who have helped us succeed. We have been blessed with a modicum of success.

But it’s not about Frank Hurtte or the team here at River Heights Consulting.
Instead the real secret is all of you.

Thank you for your help and support since November 13th of 2005.  You have given me hope in the face of adversity and have kept me laughing with your distributor stories.  You have blessed me.

I hope to be a blessing to you and your company some day as well.  And with the next 10 years ahead, I thought I should share our new and improved logo:

As always, I would love to hear your thoughts!  Happy Thanksgiving!

Strategic Account Planning Part 3

What do you know about your account?

Everybody claims to be a Solution Seller these days. It’s the place where the cool kids are supposed to be hanging out in world of selling. To illustrate, a quick “Google” of the term Solution Seller turns up something like 179 Million entries. As a group, we are talking the talk, but deep dives into the topic make me wonder.

Many of the top salespeople in our industry confuse product expertise with providing a customer-centric solution. Is there value in helping your customer select just the right product for their application? Absolutely. Does your troubleshooting assistance provide something important to your customer? No doubt about it. But, I believe solution selling extends well beyond this type of product domain customer support. If the only solution you provide comes in being able to answer customer questions about products, I suspect you are vulnerable to future competitive threats. Here is why.

We are moving into the next generation of internet and mobile driven apps. For instance, I recently became aware of some apps which are pretty comprehensive in their ability to direct a novice customer through the selection of very technical questions. Reports of manufacturers and mega-catalog distributors creatively applying cell phone pictures to the problem of identifying obscure parts are increasing exponentially. Companies with internet based monitoring of “programmable devices” are upping the ante on product based troubleshooting. Frankly, I see some of these as being game changing in the world of product driven expertise for sale.



In days of old, the knowledge-based distributor’s “stock in trade” was product expertise. Complex products with lots of nuances demanded and received high margins than simple products. Vary early on, the salesperson acted as a “human search engine” turning the customer’s request for information on some type of product into an assortment of product data sheets. Later, the salesperson translated customer start up or troubleshooting questions into pages from the user’s manual. Things have changed. Today the value for this type of service is declining. Where is the real value to be provided?

Here’s where we get to the whole solution selling thing comes into play. We are talking about recognizing and proposing solutions to the customer, often before the customer even realizes there is a problem. While your products play a role in creating the solution, the real meat of the sale revolves around what you know about the customer. And, often salespeople lack a deep rooted understanding of even the simplest information about the customer’s world.

This brings us back to precisely what do we know about the customer.

In order to have a real strategic plan for our accounts we need to take inventory of what we know now and what we should learn in the future. Our plan must revolve around positioning ourselves to really be solution providers. Or, in some instances, understanding that providing solutions to the customer is a poor use of our resources.

Here are a few items I believe are central to real customer knowledge:

• How does the customer really make money?
• What are the customer’s competitive threats?
• Is your customer part of a larger organization? How are they viewed by the parent company?
• How does your customer’s sales process work and can you somehow improve it?
• How might the customer improve their process to decrease expenses, improve output or sell more product?
• Does the customer have seasons where only a portion of their resources are used?
• Does your customer have issues finding the right people or getting those people trained?
• What is the burdened cost of labor at your customer?
• Are there labor issues related to unions, skilled trade groups or others?
• What are the raw materials used by the customer? Are any of them in short supply?
• Does it cost a lot of money to store the materials? Is shrinkage an issue?
• Are there governmental or other regulations that impact the customer’s business?

Understand, this is not an all-encompassing list. Your list will vary based on the type of customer, your own industry and other variables.  For instance, if you are an Electrical Distributor, this may be a good fit.  Regardless of your industry, you do need to look at each of these as strategic to your own customer’s future. Aligning your strategic plan to customer strategy is important to building a plan.

Strategic Account Planning Part 2

Knowing where you stand

The wizened and gnarly voiced singer on a scratched old 78 rpm disc said something like this to me this:
“If you want to get to Hollywood son, you better know where on earth here is.” I believe sellers must apply this advice to the first step of their strategic account plans.

Where are we with the account?

As reasonable as this sounds many sellers refuse to truly understand their importance with an account. Most don’t understand their strengths nor their vulnerabilities. Repeatedly salespeople tell me, “I get the lion’s share of the business at this account.” Yet, when I visit the account on joint calls with them, I see pallet loads of the competitive product coming in the door. Deeper research indicates whole technology segments which are supplied by the guy down the street. We see a long list of competitors signed in at the reception desk; many calling on people we don’t know.

How do we know where we stand as a supplier? Are we viewed as an important extension of the customer’s organization? Are we seen as the guy who provides a widget so complex that dealing with us justifies the pain of our idiosyncrasies? Are we one of many suppliers or are we important for some real reason?

We’ve got to understand this in order to build a plan that extends anywhere past next Tuesday’s call.

The first question is why sellers don’t simply ask, “Where do we line up with your organization as a solution provider?” I believe the real reason many don’t is fear. Sometimes the truth smarts. What happens if the customer responds with a negative answer? Sometimes, sellers ask the question of the wrong person. Your company may be “numero uno” with the one guy in maintenance, but viewed as a necessary evil by plant management. Other times, the evil ones in purchasing deliver misinformation to sellers to satisfy their own price-driven agenda. Understanding the real answer involves talking to

a number of people at the account. And, financially focused management types must be on the list.

In addition to simply asking, here are a half dozen sure fired ways to understand your position:
1) Do a plant tour/facility tour with an eye for competitive products in use.
2) If your customer maintains a store room or parts crib, look at products kept in stock alongside those you are providing.
3) Drop by the customer’s receiving area to check on service levels. While there, look for shipments coming in from your competitors.
4) Analyze your sales to the customer. Look for gaps in purchases. Think about what other products might be used along with those you are selling the customer.
5) Ask your key contacts who else is a supplier and what they like about their service.
6) Ask someone and be prepared to listen not argue the point.

None of this tells you precisely where you stand with the customer, but it will give you a better idea of the landscape you operate in competitively. In addition, it will take you to the point of being able to identify precisely who competes in your favorite customer. Your strategic plan will make use of this information to determine how to approach the customer.

Strategic Account Planning Part 1

Strategic Account Planning Part 1

How Strategic Are your Sales People?  Here's a three question test to find out.

Just ask any salesperson if they work a strategic plan focused on developing their accounts and I will bet you a brand new nickel they will answer with a resounding YES!  Most will back up their story with lots of details on how they are exploring new opportunities, meeting new contacts, improving their business relationship and lots of other good stuff. No doubt, you will start nodding along. Perhaps you will be completely sold. Salespeople can be optimistically convincing. And, I like this quality in a seller.

But, I suffer from buyer’s remorse. A few weeks after being “sold” on the salesperson’s strategic plan, I ask for something relatively simple. Maybe it’s a sales projection for a new product, insight on the customer’s market position or thoughts on whether an OEM uses spare parts as a profit center. My inquiry could be just about anything, but the answer isn’t very satisfying. I need to be resold.

Do you ever find yourself in this position? If so, don’t feel like you are the only one. Sales managers from around the country candidly share their concerns: their teams don’t plan enough. More specifically, they rarely plan in a long term strategic way. Apparently, they too suffer from buyer’s remorse.

Over the course of our work with sales groups from dozens of distributors and manufacturers, we have developed a sure fire three question test for strategic planning at the account level. And because it’s a beautiful hot summer day here on the high bluffs of the Mighty Mississippi, I am going to share this test with you.

Question One: Tell me the plan for your next sales call at XYZ Company (which is in their top 5 accounts.) I want to know as much detail as possible. Who are you going to talk to? What are you going to talk about? Who else from our organization will be involved?

For most sellers this is easy. They have a strong idea of the next selling opportunity, what needs to be handled and often have plans for some sales ally or product specialist to be part of the mix. You will like the answer and the information will smoothly flow off their tongue. Perfect, now move the next question.

Question Two: Thinking about this same account, what will you be doing on a sales call in say 30 days? Again, give me as many specifics as possible.

If the salesperson has even a rudimentary plan, they will demonstrate how the first call is tied to this next customer interaction. Or, you may discover they are working multiple customer issues and this interaction some 30 days forward is another well thought out standalone event. In any event it will provide perception to short term planning at the account.

Experience dictates experienced proactive salespeople have a handle on their strategy a month out. Even the sales guy who merely reacts to customer emergencies and various product requests can bluff their way through this discussion.

Question Three: Looking again at this same account, what do you feel you will be working on in 120 days?

A plan for activities four months forward is an early litmus test to strategic planning. One would expect even a rookie strategic plan for an account would extend into the next quarter. Saying this, most salespeople will provide definite clues to their lack of planning.

What would a good answer be? Well, for one thing, a sign of a plan would be thoughts on expanding the business. A good response might go something like this:

“By the end of the calendar quarter we hope to position ourselves with the field service team of the customer. We want to gather information on the number of emergency field trips taken and the cash outlay for each of these trips. This will enable us to present our plans for a remote access system to management complete with financial data.”

Or the conversation might look like this:

“We want to strengthen our position with the customer by eliminating small vendors. Over the next few months I will be identifying products for conversion and presenting them to our current internal coach. I suspect that in four months we will have made identified a hit list and be ready to ask management to switch the business to our team.”

How do you get your team to think more strategically?
I believe we have to start by working to develop strategic plans for the top five accounts.

People are our Biggest Asset

In the world of distribution, people really are our biggest asset. Depending on your line of trade, people costs can range from 60 to 70 percent of the operating spend. When I speak to Distributors involved in acquisitions, the first thing they examine is the list of people involved in the business and their likelihood of “coming along” with the new owners. So not only do people represent our biggest outlay of cash, they are seen by others as our biggest asset.

Think about it for a moment, a Distributor without people is really an empty warehouse, a stack of outdated office furniture and a customer list; all of which sell on the open market for much less than a well running distribution business. But there is a problem with the people as an investment picture. If people were our warehouse, the building would be surrounded by tall weeds, the sign would be missing letters and the whole thing would cry for a fresh coat of paint.

Think about this. According to the top economist covering the world of knowledge-based distribution, we have moved from recovery to growth mode. He recommends investing in our business.

The problem is most people interpret “investing in our business” as buying things. I wonder if we shouldn’t spend a little time thinking about investing in people.

As with any kind of investment, the wise business person thinks about and develops a prioritization around their investment strategy. We’re not advising to spread money like a thick layer of peanut butter over the top of every single employee on your list. Instead, let’s think about a couple of issues.

Distributors tend to underinvest in the right people.
Part old-school American management style and part human nature, leaders invest massive time and money trying to turn low performing employees into successes. But looking at the situation with a jaundiced eye, we may be making a poor investment. Often low performers are really not performing to expectations and all our time and treasure goes to getting them up to mediocre. Maybe even temporarily mediocre at best.


A better investment strategy might come via investment in top performers. Think about how your top salesperson might benefit from a high level negotiations class. Imagine giving the top two or three folks in every department additional training in distributor finances. Wonder what might happen if your warehouse managers were exposed to state of the art facilities in other parts of the country.

Anybody with direct reports would benefit from investment in fundamental management skills. Things like conflict resolution, employee reviews and setting appropriate goals could pay major league dividends.

What productivity tools would your top performers like to try? What do they see as the potential gains in productivity? Often we hesitate to put tools into the hands of our star players because we’re worried the rest of the team would expect the same. It’s high time we get over this “perceived fairness” issue. Top performers deserve more tools and greater investment.

Cutting losses with the wrong people
Do you have someone onboard who isn’t performing? How long until they will get to acceptable levels? If you don’t have an improvement schedule with measureable milestones, you may have an issue. Here’s why. Most poor performers are nice people. They have families. Some can give you a zillion excuses as to the slowness of their progress. It becomes very easy to get allow emotions to stand in the way of making the right business decision.

Not to harp on a sore subject, but I regularly see workers who have not performed to expectations for 3, 4 or even more years. Their management gives them a periodical “pep talk” but nothing substantial is accomplished. Frustration builds on both sides. What’s worse their continued presence assures coworkers there is no penalty for doing a shoddy job.




If you have someone like this on your staff, I suggest setting some improvement dates. Examples might be as follows:
• Creates 200 new invoices per month by August or terminated.
• Opens 5 new accounts per month for the second quarter or terminated.
• Drives gross margin percentage 1 percentage point higher by October or repositioned.
• Receives daily shipments without error for third quarter with less than 1% error or terminated.
Some tough language; you bet. But the point is, management is forced to move on deadwood now.

Invest at the top too…
Building skills at the top level is more difficult than with line employees. Even though a “Google Search” returns 71 Million “leadership” training resources, I wonder if class room training is the best answer. First, many of the folks who could benefit most are “up to their necks in alligators;” classroom training is often sabotaged by emergency issues in the office. More importantly, any kind of generic training is fraught with information which is either review or not pertinent to our business. A solid distributor sales manager probably isn’t going to benefit from war stories (case studies?) from the world of real estate or insurance.

So if leadership training for top management doesn’t come via classroom training, where does it come from? Here are a few thoughts:
• PriceWaterhouseCoopers and the Association Resource Center found the mean Return on Investment in coaching was 7 times the initial investment and over a quarter of the coaching clients report a stunning ROI of 10-49 times the cost. Even if a distributor can only squeeze out half the value as others, it’s a good investment.
• Networking with others in our industry is my personal favorite. Networking can be fun but when it comes with a planned agenda and preparation, it drives massive ROI. To this end, we hold several sessions called “Meetings of the Minds” where non-competing distributors share best practices in their business.
• Benchmarking with others drives value. This takes networking to a new level. We are big believers in the power of distributor association reports.

Finally…
Let’s go back to the economists and their reports. Now is the time to invest in business process. Any efforts made today will pay off with smoother sailing when the next recession hits; and recession is a certainty. If you wait till the stormy winds are beating down the door, it’s too late.

Pricing Process: 10 Simple Questions

Some questions demand an answer, they literally jump up and down screaming for intelligent action. The problem is this; many times these questions develop over a long period of time. Because they develop slowly over time, they become invisible. Life’s like that. My dad used to say, “We’re too busy picking up acorns to see the tree.” I think we’ve gone past the tree and are neck deep in forest.

Last week I had the opportunity to address the leadership teams from a select group of distributors at the SPA Strategy Session in Fort Lauderdale. I was the final speaker, and the meeting was running long. To cut my talk short and put a little life into the meeting, I cut my presentation down to ten simple questions. I feel each of these questions demands an answer. Together, they demand action.

Question 1: Do you believe our business environment is changing?
It’s pretty hard to justify any kind of answer except for a resounding… yes. Our customers want more services, faster responses, more solutions and tons of other things. We’ve got more competitors. The big national chains are pushing into the sacred waters of our product niches. Amazon and Google are eyeballing the green grass we once claimed as our own.

Supply Partners want more from their distributor partners. We find ourselves doing some of the tasks once performed by their field sales teams. Besides these obviously sales related functions, suppliers want POS data, online order capabilities and extensive customer training capabilities.

Technology is a wonderful thing, but the internet has changed the role of selling from human search engines capable of coming up with specification and application data to complex problem solvers. Phone systems and voicemail have created a world where everybody is hard to reach. Technology is now available to everybody regardless of company size and type.

Even the people we work with has shifted. Boomers are marching off to the retirement sands at a rate of 19,000 a day. Generation X and the Millennial Generation aren’t behaving or thinking like the old timers ahead of them. Demographics shifts make our world spin like a broken boomerang.

Question 2: Does your own company need to change keep up?
“Eliminate the Middleman and save”, for some reason I can’t seem to get the picture of that old billboard along Route 151 out of my head. It’s an American axiom that’s only true if we distributors fail to change and morph our business model to match the needs of the folks we deal with, both customers and suppliers. Distribution is a change business; not changing brings death to our industry. Or, it brings extinction to our own organization.

To me the answer has to be yes. We need to be in a constant state of change.

Question 3: Does it work better if everyone in our company changes in the same direction?
As leaders, our job is to direct the change. When everybody flies in formation, we are more efficient, more effective and more profitable. All departments, all our branches, our technology resources and our culture has to change in the same direction and at roughly the same time.

I find any argument for changing in divergent direction questionable. So again the answer must be yes.

Question 4: Is it harder to change when you don’t know what you’re doing today?
The answer to this question comes via my dash-mount GPS unit. Before providing any driving directions to my destination, it goes through a series of steps called “finding current location”. Most distributors feel like they know what they are doing today. But deep analysis indicates they aren’t really sure how things work in the sales department.

I concur with my GPS on this one. We need to know where we’re at and what’s going on before we start making any changes.

Question 5: What’s the difference between your accounting and sales department?
Some say, “She’s was a natural born salesperson”. I’m not going to get into that argument, but I wonder if it’s feasible to say, “He was born an accountant”? True some folks have natural skills with numbers, they like to keep track of things. But, would you trust your accounting functions to a “natural” if they didn’t have a strong understanding of standard accounting procedures?

Tax codes, financial institutions and others insist on specific procedures and distributors are pretty good at following them. As leaders, we insist on it. But when we get to sales, we have few procedures, no measures of success in building customer relationships. Many of us have a hard time explaining if a salesperson is successful because of their regimented activities or if they happen to have a “lucky territory”.

I believe evidence points to a simple answer to this question. Accounting has a process. Sales does not.

Question 6: What happens when you try to change the sales group?
Screaming, kicking, gnashing of teeth? Most distributors discover the one department which should be a harbinger of change is the most resistant. What’s worse, salespeople can be pretty darn convincing. They offer up dozens of excuses; customer issues, competitive issues, supplier issues and some even more convincing.

The very nature of their work puts them outside the eyes of supervision. Some say they’ve changed, but don’t; silently biding their time until management relents. Others use their commission plan as a trump card against change. A good many will go underground. Their company begins charging for delivery on nickel and dime sized orders, and they take time from selling to personally run all over the territory delivering from their car.

The point of all this is we’ve got to anticipate pushback. And, as leaders, we’ve must hold our ground.

Question 7: Why is it important to document your direction?
Thinking about sales department pushback, one of the things the sales guys will say is “our boss goes out and hears some slick talking consultant (who probably has never sold) and comes back with a hair-brained idea and tells us to go forth and follow the plan”. It’s the old idea of the month thing.

Documenting slows down the whole activity. It forces us to rethink the idea. It helps us refine the course. But there’s more… Documenting the direction helps others better understand the direction. It allows better and faster training. It steadies the course removing distractions along the way.

Question 8: Why measure your progress?
“That which is measured improves, that which is measured and documented improves exponentially”
Pearson’s Law
In a world filled with distractions, measuring progress keeps you moving in the right direction. One client of mine is fond of saying, no coach trains their team to the final score; no football coach says we need to score more touchdowns. Instead, they work on blocking, tackling, first downs and lots of little steps that lead to better scores. They realize it’s the little things that drive success.

For the leaders of a distributor, it’s about the steps that lead to more customers, customer retention, more efficient handling of orders. Simply stated, if we only measure the final gross margin, we miss out on the things that drive customer orders.

Question 9: What’s the difference between coaching and managing?
For one thing coaching is about personal development; helping each and every person perform to the best of their ability. Coaching is one-on-one. Coaching is the first approach to growing your team. Coaching is about building playbooks and organizing the players so everyone is in the right place. It’s about getting the most from everyone on team.

Managing is the next step. Sometimes coaching involves setting harsh reality that a player doesn’t belong on the team. Managing sometimes involves jettisoning a person who refuses to respond to management.

Ideally, both managing and coaching is based on objective metrics. People aren’t judged on personality or attitudes. Instead, decisions are made based on performance data. Are they following the documented procedures? Are they performing in the small steps needed for larger success?

Question 10: What can we do today?
This is the question that needs the greatest thought. Doing nothing is easy. Doing the right thing involves the evaluation of risks and rewards. Doing something right now is important. There may be a lot to do.

Here are some points to ponder.

First, in a well thought out plan, the processes are interactive. Improving one thing typically improves a many other points along the way. Everything in our business interacts with the things they touch. Here’s an example.

When you build a pricing process, one of the typical first steps is segmenting customers by size, business type and ease of doing business. The activity of segmenting improves marketing, sales effectiveness and planning. Different pieces of the puzzle, but each is improved. Building a real process is important.

Three parts of a real process
First, there is no such thing as an informal process. Many distributors lull themselves into believing they have a process but it’s done on a person by person basis. Not so….

To be a real process it must have three important ingredients.
1. Documentation – a detailed written document which describes how the process works, who is specifically responsible for each phase of the process, how success is measured and who has the ability to modify the process in exceptional cases.
2. Metrics – metrics take the subjectivity out of the equation. We can understand if progress is being made. Our team can easily understand their own personal improvement, without management intervention.
3. Coaching and management points – the metrics give us places to help our team improve along as the organization moves through the growth plan. Coaching and managing is predictable and without opportunity for personality to come into play.

Let’s get moving
I am often asked how and where to start in building a process. I believe there are a two places that stand out in comparison with others. Here’s my criteria. First, they carry major impact to the distributor’s bottom line. Secondly, they interact with the greatest number of other processes within the organization. In other words, do a good job with these, and the interaction affects the rest of the business. Here they are…

Targeting
Companies who work a real, and vibrant targeting process are 47% more effective in reaching their sales goals. They understand their value. And, more importantly, they know which customers are most likely to benefit from their value. Salespeople plan better, bring new products to market faster and waste less time. Managers have more and better coaching points and measures of success. New salespeople especially get traction faster and with less thrashing around.


Pricing Process
I have had the opportunity to closely observe the work of David Bauders’ Strategic Pricing Associates for the past two or three years. Their clients typically drive two full points to their bottom line. The cool thing about gross margin improvement comes because most of it (80% is a good estimate) falls to the distributor’s bottom line. We see instant profit improvement for the home team. And the Pricing Process improves the distributor’s work in segmentation, value selling and overall operational efficiency.

We’ve asked you a lot of questions. Do you have a question for us?