Distributor Advisory

Most of you don’t know, but River Heights Consulting is located in Davenport, Iowa. Maybe you've seen the Quad Cities on the Today Show recently.  The Mississippi River at Davenport is standing in the midst of a flood of historic proportions. Downtown had a break in the floodwall and water is cascading down Second Street like a raging mountain stream. Just moments ago, my phone convulsed in a wild, continuous modulating buzz. Not knowing whether it was the result of my last coffee spillage or something else, I grabbed it quick and was met with an Emergency Flood Advisory.

Without all the extraneous noise, allow me to share a “Distributor Advisory”. Based on the prognosis of Brian Beaulieu and the folks at ITR’s latest report, we are in for a slowdown end of this year and early 2020. Quoting a published piece paraphrasing the words of Alex Chausovsky who serves as the Director of Speaking Services at the same company:

“…according to ITR, the U.S. economy has peaked in terms of ITR space within the usual 2- to 4-year cycle. The good news; however, is that the impending slowdown isn’t expected to be particularly significant, it is only expected to feel different than the recent artificially-supported boom years. And after the mild slowdown, another rising trend is predicted in 2020 to 2021.”

We are facing a slowdown, perhaps not a full recession but still, we need to be prepared.

Consider this your Distributor Advisory.

Like the “Flood Advisory,” which suggested moving to higher ground and getting vehicles out of the flooded downtown area, I am going to provide you with a few ways distributors can and should plan ahead.

Alert plan for Distributors:

• Use this downturn to eliminate poor performers.  If you have a person who is “just not doing the job” or failing to produce, you can use the economic conditions to open their “seat on the bus” for somebody better.  Further, acting now is the humane thing to do because there are still plenty of jobs on the market. The situation is generally simple, your team realizes this person is not pulling their weight. They are probably wondering why you keep this “slacker” on staff.

• Start looking for good replacement people as the economy softens this summer/fall.  In past downturns candidates seem to be more plentiful. Sadly, strangely, stupidly, there are still companies out there who terminate people based on seniority. We recommend constant recruiting so you always have a select group of future stars ready to join your team.

• Automate processes – this includes things like online order entry, email to order conversion systems, use of AI devices like Amazon Alexa and the Epicor EVA system, warehouse information flows and digitalized shipping documents. Going digital with an online store is a good use of your investment dollars. For folks in the automation and electrical industry, KYKLO has a unique approach to bringing you online without the heavy upfront cost.

• Use manufacturer Co-op dollars for something besides golf balls and polo shirts.  Ask your manufacturer partners to assist in using Linkedin to find new leads and develop a process for making sure they get the right attention. I believe leads need to be qualified by someone who can recognize the difference between an account with great potential and the car wash down the street that buys 200 bucks a year.

• Target your efforts. If sales are sagging, the first impulse for many people is to go out on a fishing expedition for new customers. However, these rarely produce the results expected. My experience is most distributor salespeople don’t really understand the right people to pursue. Following up on qualified leads, as described above produces results. Old fashion “smokestack chasing” doesn’t. Distributors would do better to refocus existing salesforce attention to getting more wallet share from existing customers.

• Monitor pricing – if you have a pricing process, focus on it from the top down. If you don’t have one, then think about building one. Current events point to the possibility of a tariff situation which will result in a rash of manufacturer price increases. Make it your mission to not absorb any of these without an offsetting price increase to your customers. Experience shows salespeople are often slow to renegotiate special pricing agreements (SPAs) with customers. The loss of a couple of months of revenue impacts a distributor’s bottom line. One more thing, whenever possible add an extra point of gross margin for yourself. For example, a 6 percent price increase from the manufacturer should be a 7 percent increase for the customer.

• Track the heck out of opportunities, especially long to mid-range opportunities.  Why?  When the economy comes back, you will better know where the business is. This is one of the first steps toward improving your ability to forecast. Distributors who can anticipate the end of the economic slowdown are able to gain customer share and generally gain extra growth when the downturn ends.

• Start Charging for your Services. Some of your

  

  Frank's Fee-Based Manifesto is a great place to
  start for those nervous about charging.

  customers do not contribute enough gross margin to cover the cost of your services. The key to moving these customers from money losers to money makers is adding fees to the things you do for them. Truth be told, most of these customers have another choice for the help you provide them. They are probably going through a bit of a downturn as well. They need what you provide now more than ever.

A final thought
This is a temporary slowdown with some great growth coming in 2020. The distributor who follows this advisory will achieve two minor and one strategic thing. First, more revenue in 2019. If it’s going to slow down 'tis better to make some money as you prepare for the growth ahead. Second, the distributor best prepared for the upturn captures more customer dollars.

Finally, the strategic thing is this. Most companies are capable of only reacting to economic changes. The truly successful companies anticipate and build a process for maneuvering through all kinds of conditions.











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