Strategic Insights 40
AUGMENT ASSOCIATIONS’ FINANCIAL PERFORMANCE-SURVEY REPORTS
Give Al Bates a
lifetime-achievement award for outstanding service to independent distributors.
No one has taught more distributors the basics of financial management and goal-setting
than “20% ROTA” Al.
For more than 30
years, Al has crunched numbers for over 40 different distribution trade associations
compiling a historical database for about 10,000 distributors as a byproduct.
To paraphrase his longitudinal findings:
90% of (the same individual) distributors have been
averaging a 7% pre-tax, Return on Total Assets (ROTA) for over 15 years.
The 90%-group does creep up to 8%+ in good
economies and down to 5% in tough times, but few seem to escape from their commodity-hell
But, have hope! The same, individual star-performers
stay in the top 5% averaging over 20% ROTAs. And, my guess is that they get 4-6
times the after-tax, Return-On-Investment (ROI) as the bottom 90%.
Al has supported his survey work with indefatigable
teaching of financial goal-setting and discipline. But, don’t the persistent, non-results
for the bottom 90% raise questions like:
Have the easy benefits of using financial surveys
and related tactics been exhausted after many years of availability?
What are the – limits of, blind spots for and
dysfunctional mantras from – using (only) financial numbers to run a company?
Are there additional, Profit-Improvement Math perspectives
and education that can turbo-charge financial surveys?
FIRST: THE BENEFITS OF FINANCIAL NUMBERS
must file the same federal tax-returns to pay timely, correct taxes. Don’t pay fines
or go to jail! You need audited, GAAP-compliant numbers to borrow working
capital loans from banks. And, financial forecasting and discipline is vital to
not running out of cash to meet obligations and going broke. Be fluent and effective with what Big Al is
SECOND: THE LIMITS OF FINANCIAL REPORTING
are summary symptoms of unmeasured, upstream, root-causes for the net profits
or losses being made on every customer and (active) SKU. Besides financial
discipline, why not also manage the root causes for both big profit and loss
cross-subsidies that are hiding within financial averages?
What is your current cost-to-serve model that gives
you good-enough estimates for the service-activity processing costs for every
line item? You could then sum them up to get Cost-to-Serve Dollar (CTS$s)
totals for every SKU’s picks and every customer’s order costs. Why not know
what I call the “Value Exchange Equation” (VEE) for every element in your
business from lines to customer-niches and sales territories. The VEE equation
Gross Margin Dollars (GM$s) less
Cost-To-Serve Dollars (CTS$s)
equals Profit Dollars (P$s)
Note that “GM%”
isn’t in the VEE. GM% can’t tell you either the GM$s or the CTS$s in the VEE --
the factors that really matter! Most
naturally occurring high GM% SKUs and customers have money-losing VEEs.
Surprised? If so, what additional education might augment your financially-based
and CTS-Math-free assumptions?
VEE DATABASE FACTS AND CTS-MATH EDUCATION
Waypoint Analytics provides a “Line-item, Profit
Analytics Management” web service to many distributors across many channels. Waypoint’s
longitudinal database for all its distribution clients concludes that the average
distributor losses a little-to-a-lot of profit on:
70% of all line items
65% of all orders
80% of all customers
10% of all active SKUs
The smallest 50% of orders generate less than 10%
of the GM$s, but consume more than 50% of the CTS$s for losses. The busi-ness of small-dollar picks and orders (even with high GM%) eats up everyone’s service energy. No wonder the bottom
90% have no extra resources to find and execute on extra-value opportunities for
the few, extremely profitable customers and SKUs.
existing, data-free beliefs get CTS-Math savvy, I’ve just completed a CTS-Math
course comprised of 50, 5-minute, web-delivered videos with discussion
questions, etc. Once a distributor team is fluent with CTS-Math and has the
right diagnostic reports, it is easy to double sales and 5-to-10 X profits with
your existing customer portfolio.
STEPS TO IMPROVE FINANCIAL SURVEY TOOLS:
Contact Randy Maclean, the founder and CEO of
Waypoint Analytics (firstname.lastname@example.org)
and inquire about his doing a Line-Item, Profit Analytics Database presentation
for your group.
Request from me, the 50 slides that backstop my 50
CTS-Math lessons at email@example.com.
I’ll also send you more information on the course with a log-in to some sample
Stop managing financial symptoms and working hard to make little money. Learn how to renew the Profit Core that is hiding within your financial