Friday, December 21, 2012

The New Salesman

The mix of good habits and even better
planning will be rewarded!
We’ve all got to start somewhere

Contrary to popular belief, good salespeople don’t grow on trees.  Nor can you drive by the local mission and pick the one with the best lettered “will work for food” sign.  Lastly, I want to drive a stake through the heart of that hundred year old myth, that certain parents beget “natural born sales wizards”.  On the contrary, good salespeople are created, molded, shaped, formed and trained.  Not so good salespeople can develop bad habits, learn the wrong kinds of behaviors and morph into non-performing drains on their employers.

Unfortunately, our industry has a habit of tossing new guys the car keys, pointing to the territory and saying “go get ‘em, kid,” than providing any kind of real training.   This was an issue back in our dad’s day, a mistake in our day and a gargantuan mistake today.  Here’s why.  According to the research conducted by Matthew Dixon and Brent Adamson in their book The Challenger Sale, the difference in results of average and top rank salespeople is growing.  In the old days of purely transactional selling (Hey Mister, want to buy a Programmable Controller?) the difference between the star seller and the average guy was 59%.  In our world, the world of knowledge-based solution selling, the difference between star and average is over 200%.

The kind of slow progress toward the top that comes from trial and error learning impedes profits.  Think about this.  Most new sellers start off just a shade below average in performance.  Once they get to average, their performance is still 200% less than a top performer.  And, if we can get them to a point of statistically half way between average and star status, they are 100% more effective than the average guy. 

Now I know what a lot of you are thinking, we hire engineers, technicians, classically trained professionals.  In a world of knowledge-based selling this is all good, but it still doesn’t equate to sales moxie.  What’s worse, since most of the leaders of this industry grew up in the age of zero training, many of us don’t really know what a good training program looks like. 

I believe the first several six months sets the stage for success by laying down a number of good habits which morph into a foundation for growth.  Yet very few distributors invest time into establishing a plan for ramping up the new person.  Instead they stand back and watch, after a few months they may realize there’s a problem.  After a couple of informal talks with an already frustrated new salesperson, they finally decide to enroll the guy down at the local Dale Carnegie franchise.  Everyone struggles, money is lost and eventually the salesperson in question either figures thing out, or is flushed as a hiring error.

Finally, here is a thought from another industry expert:  In The Little Black Book of Strategic Planning for Distributors, Brent Grover estimates the cost of getting a new distributor salesperson to the point of being a profit generator at more than $150,000. But, he says, “if distributors capitalized these costs as one would a piece of production equipment – instead of writing if off as a current expense – that would be an asset on the balance sheet of at least $150,000 per salesperson.”  The sooner you can get your new guy up to speed – the better.  I know companies where this number is far greater.

Now a few weasel words from yours truly.  All of this is dependent on you making a sound hiring decision and hiring errors do happen.  Further, it depends on you having a reasonable sales process, good supply partners and the finances to drive the training home. 

With all of this in mind, join us as we spend the next few weeks exploring the ins and outs of a good “on boarding” process.

 
Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:
http://amzn.com/1481196448

Sunday, December 9, 2012

Why Don't We Sell More? in Graphic Form

I practice "mind mapping" even though a lot of these turn out looking a little more like flow-charts than true mind maps.  This came out of a client discussion last week.  Do others find value in this type of chart?

Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:
http://amzn.com/1481196448

Tuesday, December 4, 2012

But I'm a Salesperson, NOT a Planner!

I’m Already Working 12 Hours a Day, Do You Want Me Selling or Planning?




Many distributors have discovered that it takes a very long time to establish new customer relationships.  Others find that in spite of success with existing products, their organization’s ability to launch related products necessary for long-term business health are hampered.  

The simple truth is our industry has slowly adapted a dangerous habit.  We practice a reactive sales model.  It’s not an immediate threat, but long term, it’s crippling.  Here’s how it works.  An existing customer calls with a question or support issue on some past purchase.  The salesperson reacts to this issue immediately.  Along the way some excellent customer support is provided.  The customer compliments the seller and potentially rewards this behavior with another purchase.  Everything sound good so far?  The unfortunate part of this equation takes a while to manifest itself.   Our ability to find new customers or expand the product technologies we sell is compromised. 

Planning lies central to this issue.  Or more precisely, the lack of planning is slowly cutting and constricting the life’s blood of future success.  During the past decade, in spite of technology tools to expedite its impact, planning has fallen on hard times.  This can range from simple things like setting appointments to investing the time matching product introductions to customer need.

While conducting research for our book, The Target Driven Sales Process, we discovered many salespeople still used product-of-the-week selling.  With pre-thought, no metrics, and no analytics, these folks randomly hand out product literature in a time-consuming, scattergun approach.


Planning improves efficiency.  Yet to a certain segment of our sales force, this concept seems counterintuitive.  Taking time to reinforce planning is frustrating because most of those in management positions take it for granted.  There really is a new reality.  It truly is different from back “in our day.”  Smartphones, iPads, electronic literature and lots of other gadgets allow a rookie to disguise their planning deficiency to a point.  Planning is different from 15 years ago, but the skills are still essential to success.  
We believe the first step in planning must involve the process of matching customer needs to our product offerings; most call this targeting.  Face-to-face customer time is a precious commodity. Wasting a single second talking about a product for which the customer has no interest is a travesty.  Wasting the time of a product specialist or other team member should be a hanging offense. 


Distributor Planning Made Easy.  Check out our Distributors Annual Planning Workbook:
http://tinyurl.com/DistributorAnnualPlanning


Monday, November 26, 2012

Planning Part VI:Our Friend Technology

Technology – Our Business System is our Friend
While not yet given a fruit name, your business system is your best piece of technology.

Business data is a competitive advantage.  I find it weird that many distributors have laid out big piles of hard earned cash but most aren’t getting their money’s worth.  Imagine buying an efficient new warehouse but still stacking stock on grandpa’s homemade wood racks.  Sounds goofy, but according to a sampling of consultants form our business, the average wholesaler uses only half of the power of their largest technology investments.  End of year is the time to bring your crew to a new level.

Customer Data by Product Line

For just a moment, forget the fancy CRM package, forget spending thousands on iPads, postpone that next version of smart phone, they’re all nice to have but customer data is a must have.  Here’s what we’re talking about:  Sales and gross margin numbers by product line on a monthly basis.  Without this kind of information, it’s easy to miss opportunities. 

If the information is there, get it out.  Before you decide to delegate the dissection of data to your sales managers, think about these two facts:

·        If it costs a few hundred dollars to happen, how much does it cost per hour if your sales leaders take an extra hour a month to crank the data out by hand?  If you value your sales managers at $150 an hour, calculating the information for just one hour per month costs $1,800 per year.  Sales managers tell me they spend about 6 hours a month – that’s $10,800 a year.

·       The experts (whoever they are) tell us selling to existing customers is 5x easier than selling to new prospects.  When you lack sales by product line, it’s darned hard to tell what you’re not selling.

Salesperson Data by Product Line

Just like customer data, lacking the ability to accurately (and objectively) understand your sales team’s performance by product line creates difficulty in evaluating sales effectiveness.  When you understand precisely what your salespeople aren’t selling, training and coaching move to the next level.  A monthly report by salesperson fixes those issues.

Strangely, many distributor ERP systems allow for these reports but the data lies just below the surface.  Before you spend money on additional products or services explore these areas:

Daily Price Overrides

Think about your official price strategy.  Here’s the difference between strategies that work and the ones that don’t.  If everybody can override system price without answering to anyone, then whatever your strategy; it isn’t working.

I used to be able to remember the guy who said, “That which is measured improves”.  Regardless of the origin, I believe it.  What gets measured is the role of a manager.  If you don’t know who is overriding your price, you need to study it.  Without your instruction and coaching, it’s pretty easy for a new customer service person to short circuit your pricing strategy. 

Automate your Special Pricing Agreements

Since we’re on the subject of pricing processes, here’s a thought for you.  Special PricingAgreements (SPA’s) and their close relative the Ship and Debit program, were but a glimmer in purchasing agents’ eyes during the big recession back in the 1980s.   A couple of recessions later and distributor land looks like the sweeping fire in a Smokey the Bear poster.  I am hearing growth ranges that sound like, “we used to have 30 or so SPA’s now we have 200.”

Clerical and computer errors in SPA accounting may be costing you thousands.  This is amplified in the case of ship and debit methods in place.  I can think of a dozen distributors I know who have reported losses in the thousands because somebody was out with an illness.

An automated system gives you build a procedure and process.  If you do it right you’ll have metrics and coaching points to fix the system while everybody remembers the details.

Before you ask…

Are there dozens of other things you could be doing?  You bet.  If we try to get all of them done, you’ll run out of bandwidth.  And remember, that which is measured improves… or something like that.



Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:
http://amzn.com/1481196448

Friday, November 16, 2012

Planning Part V: Manufacturer/Supply Partner Relationships


Ever feel like you're wearing this t-shirt?
 
Manufacturer/Supply Partner Relationships

Stuck in the Middle with You

A quick blast from the past: its 1972, you’re tooling down the road in your dad’s Oldsmobile grooving on Casey Kasem’s American Top 40 Countdown.  As you navigate your way through the A&W parking lot, Casey spins the song soon to be the theme of distributors everywhere, “Stuck in the middle with you”.  And, just like the song says, we in the distributor world are stuck in the middle with our suppliers. This means supply partner planning is every bit as important as customer planning.  And keeping with the lyrics, you may find you're dealing with both clowns and jokers along the way.  Discovering and handling these will contribute to your success in the coming year.

Supplier Stratification

As with customers, the first step in building a plan (and a strategy) comes in understanding the positioning of your suppliers.  I call this supplier stratification.  Fundamentally all suppliers fall into one of 6 categories:

1.      Profit Partners – these are the suppliers who account for day to day profits.  They work closely with your team to grow business today and provide the revenue flow that supports your business.

2.      Strategic for immediate growth – these are suppliers that allow you to produce growth and revenue next year.  Often these are product lines on the periphery of your current sales.  For example, an electrical distributor might produce immediate growth by working with a vendor of electrical safety equipment.  Just a little attention today could produce growth without a great deal of training and positioning.  These will never make your top 10 suppliers, but adding a couple hundred thousand to the top line sale is not a bad thing.  (By the way, I recommend setting a minimum growth amount to make this list.  This varies from company to company but $100K in two years is a good starting point.)

3.      Strategic for long term growth – these are accounts which drive your company into the future.  They stand in place to be major producers sometime in the next 5 years.  As our world changes these manufactures are emerging technologies which position your company over the longer haul.

4.      Customers want them so we keep them around – suppliers that you would like to convert their sales to something else but customers keep asking for the brand.  Some manufacturers have strong brands but employee saturation distribution.  They bring little strategic value to your company, the margins may be low, and they do little to improve your place in the market. 

5.      Line fillers – we all have them.  We take orders for their products but don’t really proactively sell their products.

6.      Don’t know why we have them – do little for us and occupy a small place in our catalog and on our shelves.  We probably would have severed ties but just haven’t gotten around to it.

Understanding the profit picture involves more than just Gross Margin percentage…

Many distributors make the mistake of evaluating their suppliers on gross margin alone.  But the top performers have developed more comprehensive methods for scoring their vendors.  Things like ease of doing routine business, “pull through” of other products, ability to support your efforts and aggressive distributor friendly marketing plans must be taken into consideration.

If you have not already developed a supplier scorecard, you should make this a top priority.  Stay tuned, because we will soon be making our own scorecard available…

Supplier planning is critical

We don’t have time to plan with everyone.  But armed with your new stratified vendor list, it should be obvious who deserves your time and effort. Your plans should include joint marketing activities, focused training, and expanded product launches.  It should also include some very specific product targeting. 

Any plans should include dates, responsibilities, and desired measures of success.  Dates for some kind of formal plan review must be a part of a real working plan. 

If the vendor doesn’t want to join you in real action oriented planning, if they don’t want to carry the burden of their portion of the activities, or if their local team refuses to engage, now is the time to reevaluate their position in your stratified list of supply partners.

Does your sales team know the status of the suppliers?

Strange as it may see, many distributors struggle because their sales team doesn’t know the status of suppliers.  Sometimes they do know but refuse to follow management direction because of personality conflicts with the local team of your best suppliers. 

End of the year planning includes spending time explaining the importance of a unified push into the market.  Some of your “lone ranger” sales types may need more than a pep talk.  I recommend scheduling follow-up meetings on a quarterly basis to insure your market direction is followed. 

There a quite a few more points for the more advanced distributor (we will be publishing a more complete document soon), but armed with this short list you’re on your way to a great end of the year plan.


Distributor Planning Made Easy.  Check out our Distributors Annual Planning Workbook:
http://tinyurl.com/DistributorAnnualPlanning

Wednesday, November 14, 2012

Frankly Speaking: Automation Fair 2012

Rockwell Automation Fair from the Street Level

I attended Rockwell’s 21st Automation Fair last week in Philadelphia, and since loads of people are asking, I thought I would share a few thoughts on the fair from a street level perspective.  Over the years I have attended all of the shows but one, so I feel relatively well qualified to comment.

First, in spite of Hurricane Sandy and Northeaster Athena, the attendance was strong.  Rockwell published the first day’s attendance at somewhere between 9,000 -10,000, but it definitely seemed like more.  The booths were packed and the people seemed qualified.  The show started at 8:00 AM and unlike many shows that start off slow – the line had already formed at 7:30 in the morning. 

I saw attendees from virtually every corner of the globe.  This shindig really is a world event.

Secondly, I saw my all-time first planning issue with one of these fairs.  They ran out of cookies at lunch on the first day.  While this is a small matter, it is a first.  You can probably tell I am food oriented because I also noticed this year’s fair included massive piles of donuts.

As in the past, there were tons of cool new products introduced at Automation Fair.  The list is online here:  http://www.rockwellautomation.com/events/automation-fair/press/press-releases.page

My vote to the coolest new things goes to FRABA, with the introduction of a programmable potentiometer for industrial positioning applications.  Here’s why I am excited.  This thing is a drop in replacement for old time positioning pots, but the guts are a magnetic absolute encoder.  It’s programmable without the need for any tools.  For an end user, it eliminates the need to stock multiple replacement units.  For distributors, it allows a single unit to serve as “service stock” for dozens of customers.  Read about it here:  http://www.posital.com/us/products/POSITAL/AbsoluteEncoders/Programmable_Potentiometer_Ind_Datasheet_DataContent.pdf

Finally, the Automation Fair continues to be one of the best automation related showcases in North America.  If you are an automation supplier that doesn’t compete with Rockwell, you should check it out.  For those who do compete with Rockwell, I suggest you build on their model.

Monday, November 5, 2012

Planning Part IV: Building a Better Plan


Building a Better Marketing Plan – Annual Planning

Let’s have a difficult discussion.   The cold hard facts are most distributors do a lousy job with marketing.  Over the years, most distributors leaned on the brand recognition of their supply partners.   In a few instances where their major supply partners use very limited or exclusive distribution, this strategy may even work.  However with just a couple of exceptions, meaningful exclusive channel partnerships are slip sliding away.  And this leaves distributors with a need to crank up their marketing efforts.

In distribution there are three basic components of marketing (ranked here from easiest to hardest): sales aids, sales events and brand building.  Experience dictates marketing people on distributor payrolls tend more towards the keeper of the trinket closet key and event coordinator.   We are not bashing them for the work they do, but we do believe it should be expanded a couple of notches. 

Let’s take a look at how we might move our marketing effort forward in the coming year. By answering these sets of questions:

The Distributor Brand

·         What makes us different from the competition?
·         How do we want to be seen by our customers?
·         Can the salespeople relate to our brand?
·         How does this play into the supply partners we have aligned ourselves with?

Target Focused Questions

·         Which of our product lines are strategic to long term growth?
·         Which customer segments offer the easiest path to growth in sales and market share?
·         How do our marketing plans directly impact our targets?
·         Who at each of our customers do we have the best relationship with?  Are there people we should be reaching out to?
·         How could a marketing effort assist the sales team in connecting with targeted new customers or new contacts at existing customers?
·         What new updates may be required for our website, newsletter, and other electronic communications tools to appeal to our target group?

Vendor Focused Questions

·         Are there vendors who require specific market activities? 
·         Who offers co-op dollars to fund certain activities?
·         How easy is it to take advantage of the dollars available?
·         Which vendors have marketing materials which could be crafted into our own materials?

Event Focused Question

·         What major event should be positioned on our calendar?
·         What resources are needed for the events?
·         What is the time line for developing materials? (invitations, promos etc.)

Promotional items

·         What promotional items did we purchase last year? 
·         What was their purpose?
·         Are there any which proved to be more/less successful than others?
·         Are there any that should be discontinued?
·         How have technology trends affected the impact of our promotional items?

Only after these questions have been given serious thought can a true marketing plan be laid out for the coming year.  Your company can be more effective and produce greater profits “just” by thinking about your current activities and promotional items.  If you push the envelope towards the strategic and brand building – you create better sales results.



Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:
http://amzn.com/1481196448




Friday, October 12, 2012

Planning Part III: Employee Enhancement


Employee Enhancement

Everybody says, “Our employees are our biggest asset.” But in the world of distribution the truth is our employees really are our biggest investment.  According to the Profit Analysis Reports generated by distributor associations, payroll cost represents somewhere between 60 and 65 percent of our total spending. 

We’re not just “whistling Dixie” when we make the claim, it’s totally true.  But sadly, very few distributors create a real plan for maintaining or improving this investment.  If we were talking buildings instead of people, rust, decay and rundown would be the descriptors in play.  Most of us hire top talent, and then we rely on our hires to keep up with changing times.  Computer skills, inventory management techniques, and sales process are left pretty much to the individual.  What’s worse; along the way, only a few of us take the time to assist the employee in their development via a formal review.

According to new research presented in The Challenger Sale, the performance gap between average and top performer has grown from 30 percent to over 400 percent.  So, moving our customer facing employees along in their development is not a good investment, it’s a great use of our funds.  My observations point that similar differentials exist in other areas of our businesses.

Let’s think about how we should go about creating an annual employee enhancement plan.

Understand Employee Strengths and Weaknesses

Planning season is a good time to analyze (and spell out) the strengths and weaknesses of your employees.  With just a little bit of thought, one can develop a list which outlines the specific areas where employees are struggling as well as areas where employees excel.  Ask yourself the following questions:

·         Is there anyone who is in the wrong position based on their strengths and weaknesses?

·         Are there any common weaknesses shared by multiple people in the organization?

·         Does everyone have the tools required to handle their job properly?

·         Are there people who employees turn to for guidance in specific areas?

·         Is there anyone who has little hope of improving their performance in the next year?

 
Rank your People

During times of economic stress (read that Recession), it may become important to scale back on your head count.  The very thought of this topic makes most of us uncomfortable, but we must spend some time thinking about the possibility.  Some employees are indispensable to the business; others are less valuable.  It’s important to rank employees based not only on their performance but also on their value to your business.  Understanding who falls into which group is important today and critical is we hit a rocky economy.

Your plan for the coming year should include setting performance improvement plans for the bottom tier employees.  Ask yourself; how long can we afford to hold onto an employee who does not create value for our organization?  Set a time line for improvement.  Without a time line, tough decisions can be postponed indefinitely.   We’ll operate under the assumption that nobody is inherently evil.  By keeping them around for the long haul in spite of performance issues, we diminish our financial success and endanger the attitudes of our best employees via frustration created by working with underperforming coworkers. 

 Establish a Training Plan

So many distributors occasionally set up a couple of hours of “one-size-fits-all” training and believe they have covered their bases.  While there may be some topics which impact such a broad spectrum of their people that companywide training is justified, generally it’s not that way.  The best training is individual and specific; matched according to the strengths and weaknesses of the person involved.

And we’re not talking about spending thousands of dollars for outside trainers.  Often, one or two folks in every organization have strengths which overlap other employee’s weaknesses.  Internally driven training works, however most distributors fail to invest the time to do it right. 

Your plan should include: topics for training, who will conduct the training, the goal of the training and a defined time frame.  And, none of this is difficult if you do the planning first.

Set Standards for Supply Partner Product Meetings

A few years ago we did a survey of distributors in the Electrical world on training.  The results were eye-opening.  The survey indicated that less than 50% of the product training sessions conducted by their supply partners met the mark.  One distributor even commented, “We feel obligated to hold these sessions but when you calculate the cost of taking our people off the road for one day a month, they are a complete waste of money.”

It appears as though these folks put very little thought into what goes into a successful training session.  Instead, they take center stage armed with a factory provided PowerPoint detailing product minutia of questionable importance.  Important points, like competitive positioning, target customers, selling points and applications are either ignored or come as an afterthought.

 Understanding new products is important.  But selling new products is our stock and trade.  We suggest you create a set of standards which outline (in detail) what you expect from a supplier training session and incorporate this into Supply Partner planning sessions.

A few parting thoughts

Here are a few other topics that must be included into your Employee Enhancement Plan:

·         Establish a time for annual reviews – these are best when not tied to raises.

·         Set improvement deadlines for employees who struggle.

·         Front line managers are a key to growing your people – push this information down to everyone who leads a department or group in your company.

·         Set a time for a ‘360’ review for yourself.  We all have room for improvement; don’t leave “you” out of the equation.


Distributor Planning Made Easy.  Check out our Distributors Annual Planning Workbook:
http://amzn.com/1481196448

 

   

Tuesday, October 9, 2012

Planning Part II: Now on to the Numbers


Detailed Expense Budget

 Allow me a couple of Bold Statements:

·         Salespeople hate budgets.  I don’t know why this is the case.  But after three decades in the selling business, the evidence continues to pile up.  Whether they fear accountability, find the process tedious, or can’t stand a couple of hours staring at a spreadsheet – it just appears as though most shirk this duty.

·         The Top Brass of most distributors came up through sales.  And, guess what?  They still hate budgeting.  As strange as it may seem, I continually run into distributors without a detailed expense plan for the coming year.  When budgets exist, they commonly are a product of the accounting side of the business, without solid input and support from the other sides of the house.  Ouch…

The best annual distributor plans call for not only a forecast of incoming sales and gross margin (which we’ve covered), but also predict operating expenses in the coming year.  Over the year, a side by side comparison of anticipated gross margin versus anticipated expenses allows the distributor to gauge exactly how the year is progressing. 

The best expense budget covers the following areas:

·         Payroll Expenses - This includes salaries, commissions, bonuses, payroll taxes, insurance and other benefits.

·         Occupancy Expenses - Things like rent, utilities, maintenance, snow removal (for those of you who enjoy Iowa-style winters), lawn service, janitorial service and other areas fall into this category.

·         Sales Expenses – Company vehicles, cell phones, entertainment, demo units, association dues and anything else which falls into the category of selling.

·         Marketing Expenses – Categories here include the calendars, trinkets and other things you give to customers, trade shows, yellow-page advertising, fees associated with your webpage, and any other advertising (such as sky boxes at your local Major League Baseball stadium and memberships in hunt clubs – insert subliminal message here invite Frank next year). 

·         Other Operating Expenses – This category includes major expenses such as insurance (liability and casualty), non-payroll taxes, depreciation and bad debt loss.

·         Other Operating Income – Rebates, backside marketing funds, special programs, SPA’s every industry has their own terminology.  But these things plan a huge role in the profitability of wholesale distributors.  Managing/maximizing the dollars is critical in any budget plan.

Many distributors wrongly take the approach that they cannot impact expenses, so they fail to put adequate projections into their plan.  While some breakdowns like utility expenses seem to be globally driven and outside the ability of a distributor to impact, we can still make some very important assumptions.

New employees impact the expenses but it often takes 45-90 days to find a qualified candidate.  Working backwards, this allows us to determine the best time to begin our hunt for new employees.   Promised raises, whether costing of living or other, must be factored into the next year’s plan. 

 Besides payroll costs, other expenses can be predicted and controlled.  Here are a few points to consider:

·         Selling Expenses- With many companies in the technology sector investing heavily in demo and lab equipment, it is possible to develop a plan for coming improvements.  Further, we believe that many companies fail to rotate demo equipment and find tens of thousands of dollars sinking down the drain as new revision products come to the market.

·         Marketing Expenses – Trade shows, major programs and advertising can be anticipated and a budget created.

·         Other Operating Income – Don’t forget to manage the rebate dollars.  Is this a large number for your organization?  Whose job is it to manage the numbers?  Will anything change for the better?  Is there an opportunity to throw fifty, a hundred or a couple hundred thousand extra bucks onto the pile? 

Once the sales forecast and expense budget are established, a company bottom line goal is established.  We have a prediction of our before tax (and interest) profit for the coming year. 

What to do if the numbers don’t come out?

Many folks ask; what if the sales numbers and planned expenses do not create a reasonable profit goal?  This is a not just a great question, it’s a question that drives another question.  What would have happened if a solid plan had not been developed?

If the first two steps of your plan show an unacceptable profit picture, we must rethink the plan.  Here are a few points to direct your thoughts:

1.      Are both plans as accurate as possible?  Has the sales team gone into the “sandbagger” mode?  Does your expense budget contain a pie-in-the-sky “wish list” of nice to have upgrades?

2.      Do the stockholders of your organization want to invest in the future?  Sometimes it does make sense to spend extra dollars to expand territories, build new infrastructure, or capitalize on some specific market condition.  These must be carefully understood and not used as an excuse for anemic sales growth or poor expense control.

3.      Do you expect mid-year changes which are not part of either plan?  If so, now is the time to reanalyze the numbers by month or quarter. 

4.      Establish some management points with real metrics.  For example:  if sales for the southern territory do not improve (i.e., increase in new customers) by June 30th, we will make substantial (and measurable) changes in the territory.

Just as the sales forecast plan was the combined work of the entire sales team, the expense plan is not just the responsibility of the controller or CFO.  To be real everyone must input their best estimates and support this portion of the plan.

 
______________________________________________________________________________
Distributor Planning Made Easy. Check out our Distributors Annual Planning Workbook:
http://amzn.com/1481196448
 

 

 

Monday, October 1, 2012

Planning Part I: Let's Start with the Questions


The Who, What, Why Sales Budget

In case you haven’t noticed, we distributors are in the sales business.  Now I realize there are a bunch of you who are starting to raise your hand with questions like: What about our inventory department?  And aren’t distributors really involved in the logistical world?

Both of these are valid arguments.  However, without sales, the distributor world comes crashing to a halt.  If sales are not predictable, and budgeted for, all of the good inventory practices in the world will be for naught.

 We believe arriving at a solid estimate of next year’s sales and gross margin is critically important to your plan.  Actually gross margin dollars are more important than sales numbers in the distributor world but, developing both allows for better communication with supply partners who deal only in sales.

Most distributors take a shot at their forecast by pulling out some growth wish – 8, 10, 15 percent are commonly tossed out.  This becomes the number for everyone regardless of territory and situation.  What’s worse, midway through the year, the number loses all meaning as a management tool for the sales team.

Introducing the Who, What, Why Planning Tool

This plan is specific and manageable throughout the year and requires only a minimum of effort to set in place.  Here is a breakdown:

1.      Salespeople are provided with their customer sales for the past 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.

Management must review 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.  It allows for coaching, mentoring and managing.



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