You’ve probably heard the saying that you can’t improve what you can’t measure, but there is real evidence that measuring the right metrics impacts profitability.
Companies that invest heavily in business intelligence were nearly three times more likely to experience strong revenue growth and 3.6 times more likely to have a faster time to market, according to the International Data Corporation.
Before you determine what metrics to track to keep your company on target, it’s essential to start with what outcomes you want to achieve.
Consider a leading distributor who wanted to start tracking the number of customer touchpoints each sales rep had on a monthly basis. The goal was to help the sales team spend more time on high-value activities rather than customer support, but until they started categorizing activities as sales-related or service-related, it was difficult to define success. Once they started tracking sales activities and order activities, they could see which sales reps were delegating customer support activities to the right people and how that impacted their sales numbers.
Once you have a clear understanding of the metrics you want to track, look at past performance or industry benchmarks to set realistic targets.
Use technology to automate tracking, and determine how each high-level goal impacts individual goals throughout the organization.
To help you get started, we’ve updated our 2023 KPI guide with more detailed recommendations on what to measure, why it matters, and how to track it.
We’ve also included insights from top distributors and our own team.
If you’re only tracking one metric, it’s most likely revenue growth. As the clearest representation of the overall health and growth of your business, it’s the number every executive team member and board member wants to see. You want to demonstrate consistent, sustainable growth and forecast future revenue as accurately as possible. Evaluating your own historical performance provides a good framework, but you’ll also need to consider market conditions and customer demand and adjust accordingly.
Tracking year-over-year revenue gives you a clear indication of whether you’re on track to meet your growth goals at a glance, but you’ll need to drill down deeper to understand what actions will have the biggest impact on future growth. For instance:
In the past, distributors measured key performance indicators on a quarterly or annual basis. Compiling these metrics into an Excel spreadsheet or creating graphs with Microsoft Power BI was acceptable practice, albeit time-consuming.
Now, in today’s hyper-competitive landscape when the largest distributors are taking an ever-growing share of the market, real-time business intelligence dashboards are essential. These dashboards need to be fully integrated with purchasing and accounts receivable data from your ERP system so they always reflect the most up-to-date numbers.
They should also integrate with customer relationship management (CRM) software that gives you full visibility into your sales pipeline and sales performance, along with any online sales channels.
White Cup BI turns raw ERP data into actionable insights with dashboards that show revenue and profit trends at a glance.
In addition to seeing a clear trajectory over a specific period of time (something that would take hours to create using Excel and PowerBI), you can see the cost of goods sold, revenue amount, and profit amount immediately.
Measuring sales performance in distribution today is a multifaceted effort that demands a shift in perspective. The traditional role of the sales representative as the primary source of product information has evolved as today’s buyers engage in extensive research, scrutinizing product details, reviews, and competitive alternatives long before engaging with a person, if they do at all. The ease of online ordering means eCommerce channels are contributing to a greater portion of distributors’ overall sales.
Digital sales now account for 20% of distribution sales, according to Distribution Strategy Group’s State of eCommerce in Distribution report, and that number continues to grow along a sharp upward trajectory.
When sales reps do engage with customers, they are taking on a more consultative role — providing additional product information, answering questions, and helping them select the best mix of products based on their existing offerings and customer demand.
Executives need to account for all these as they evaluate sales performance and set goals.
While the sales performance metrics that matter most to your organization may be different from what another company measures, there are some general indicators you should consider.
Here are four of them:
Total sales vs. goal
Based on historical sales data and your current pipeline of opportunities, you should be able to create accurate monthly, quarterly and annual sales forecasts. You can compare those goals to actual sales performance and see how close you are to reaching your targets.
Total sales for each rep compared to goal
While you’re likely well-accustomed to setting sales targets and awarding incentives based on individual performance, if those goals are not based on the most accurate data, you could be setting them up to fail.
Percentage of sales activities
At smaller companies in particular, roles and responsibilities often overlap. It’s not uncommon for sales reps to take on frequent customer service requests, for instance. However, as your organization grows, you should be aiming for greater efficiency by allowing each team member to focus on what they do best — especially when it comes to revenue-driving activities.
Categorizing each activity by type (such as sales, customer support or marketing), and creating a dashboard to monitor them can help you easily identify which team members are effectively delegating tasks to other departments and prioritizing their own next best actions.
Percentage of online vs. offline sales
At leading distribution companies, online sales drive offline opportunities, increasing overall revenue, so it’s important to gather valuable insights from both channels. A customer may start their search online and compare prices by adding items to their cart without making a purchase. Your marketing department may see those cart abandonment notifications in your eCommerce platform and send emails reminding them to check out, but your sales team is missing opportunities to have deeper conversations with them and address specific concerns.
While both online and offline sales channels are critical, it’s important to recognize them as complementary aspects of your sales strategy. Executives and sales teams should monitor the balance between online and offline sales percentages, using insights from online customer behavior to enhance and inform offline sales strategies. By understanding online purchasing trends, sales representatives can identify opportunities for upselling, personalized engagement, and value-added services that enhance customer relationships and reinforce the unique value of your products in the marketplace.
Additionally, understanding which products are top sellers online compared to offline can help you better differentiate your offerings between the two channels. Customers likely need more guidance when ordering complex equipment or components with a high degree of customization, and they may prefer to order more standard, high-volume products online.
Understanding which sales reps are on track to meet their quarterly goals or how much time they’re spending on sales activities shouldn’t require making multiple requests to your IT department. Ideally, you should be able to see these insights at a glance with dashboards updated in real time. This helps your sales leaders proactively identify reps who are at risk of not achieving goals and provide them with additional support before the end of the quarter.
Save this guide for later and download a PDF version of “Key Metrics Every Distributor Should Be Tracking”.
Mar-Hy Distributors, a commercial HVAC equipment and supply company, needed a better way to report on product and sales data without spending hours filtering and compiling data from their ERP system, Epicor P21. For instance, the team could search for recent transactions for products, but they couldn’t see global sales for those items.
Instead of seeing indicators of trends as they occurred, they were often reacting to something that had begun to happen months earlier. And by then, it might be too late to change the trajectory of a customer with declining sales or a product with lackluster interest.
When VP of Operations Eric Schmidt saw how easy it was to monitor sales KPIs with White Cup BI’s pre-built reports and dashboards, he knew it was the right solution for his team.
Executive dashboards give them a clear picture of overall business performance, including total sales, top customers and top products, so they can identify areas for growth and improvement.
“It’s been easier to immediately notice a trend a month or two ahead of time because White Cup is looking at many more data points and displaying it in a way that shows trends, there is nothing in P21 that gives you that really quick snapshot outside of the monthly sales report.”
Most distributors already dedicate a significant portion of their time and attention to existing customers because it’s much more cost-effective to retain them than to acquire new ones. Strong customer retention is a good indication of stability, which is especially attractive to investors in times of economic uncertainty.
Unfortunately, it isn’t always easy to see which customers are driving the most growth for your company and spot declines in sales before they lead to customer churn. These details are often buried in data that lives within ERP systems, and it may only become apparent after your team has spent hours creating customized reports.
Top accounts and contacts
Is your team allocating resources appropriately to the customers responsible for the most revenue? You can probably list your top 10 accounts from memory and you might send them the best gift baskets each year, but each account likely has dozens of different contacts associated with it. You may think your sales reps and customer support team is devoting enough time and attention to these top accounts, but unless you can see the contacts and activity associated with each, it’s hard to say that with confidence.
Customer lifetime value (CLV)
Customer lifetime value projects the total value your company can expect from a single account. It reflects the health of the customer relationship and is another strong indicator of stability.
Customers at risk of churning
Measuring the annual percentage of customer churn may be common practice, but it’s not necessarily helpful. It’s easier to re-engage a customer who has not placed an order within a specific time period than to try to win back a customer who has already moved on.
Pareto charts
You’ve probably heard the saying that 80% of your success comes from just 20% of your efforts. In a market where most companies are being pushed to do more with less, it’s becoming more important than ever to know which 20% of your team’s efforts are driving the most revenue. Pareto charts make it easy to see top customers and products and focus on the opportunities that will generate the highest returns.
Customer scorecards
Customer scorecards provide essential insights that help your team increase engagement and share of wallet for each customer. A customer scorecard is a snapshot of recent activity, sales performance, purchasing behavior, and other key metrics.
They help your team understand how to prioritize their next best actions, whether they’re preparing for a meeting and need a quick overview of recent orders or planning a marketing campaign that targets specific, high-value accounts.
You can use these scorecards to answer questions such as:
Your sales and customer support team can also see items that require outreach or action, including:
While most distributors monitor expenses, they may only be reviewing them on a monthly or quarterly basis. Without real-time visibility into how expenses compare to your budget within specific categories, it’s impossible to identify where to scale back.
Exporting all purchase data from your ERP system will only give you total costs without context. You can see you’re over budget, but you won’t be able to identify the culprit without filtering the data further.
With dashboards that show expenses by category, account, and branch, you’ll have a much clearer picture of where you need to make adjustments.
Ensuring you have the most in-demand products in stock when your customers need them is a critical part of the distributor’s value proposition. At the same time, excess inventory adds to your company’s costs, dragging down profitability and increasing financial risks.
Without real-time insight into product performance, you’ll always be reacting to shifts in demand month after they’ve occurred — when it’s often too late to make a difference. When you do have that insight, you can take proactive steps sooner, such as developing a dedicated marketing campaign to sell slow-moving products.
The ability to see monthly sales and the number of units sold by product group at a glance helps your team ensure a consistent supply to meet and even exceed your customers’ expectations.
Fill rates and turnover rates give your team deeper insight into how quickly products are moving so you can plan ahead.
It’s even better if you can receive alerts about stockouts so you can adjust your purchasing strategy accordingly, preventing overstocking or understocking.
Looking at the total inventory you have on hand and its value can help you quickly identify trends. You can also see how the total units you have compares to what has already been allocated.
Measuring your inventory turnover rate, or how much you’re selling within a specific time frame, will also tell you how efficiently you’re managing your supply chain.
GMROI (or gross margin return on investment) is another important metric to gauge the profitability of your inventory. This is calculated by subtracting your costs of goods sold from revenue, then dividing that number by your revenue.
White Cup BI automatically calculates these metrics for you, eliminating hours of manual work you would otherwise spend each month.
You can also use White Cup BI dashboards to get a closer look at how specific products are performing. Which ones have an increasing return on investment, and which ones have a decreasing ROI? With a clear picture of this data, you can see where you need to make changes.
From there, you can set up targeted marketing campaigns to help sell slow-moving inventory.
You can select a slow-moving product in White Cup BI and automatically create an email in White Cup CRM designed to target customers who purchased that item in the past year.
Maintaining strong supplier relationships is crucial for achieving stable growth. Reliable, high-performing suppliers directly impact your ability to meet customer demands, so you need to know which ones are contributing the most to your revenue.
Your top suppliers likely have their own KPIs, but if your team struggles to provide reports to them in a timely manner, you’re not alone.
Filtering data from your ERP system to display only certain product categories or units sold from one of your many individual suppliers can be a frustrating endeavor.
White Cup BI transforms raw purchasing data into vendor scorecards, giving you real-time reporting on demand. This makes it easy to show suppliers what they really want to know, including:
Units Sold and Revenue Per Supplier
This gives a clear indication of which suppliers are driving the most volume through your distribution network and contributing the most to your revenue.
Average Lead Time
Average lead time is more effective when evaluated on an account basis, rather than looking at each warehouse location, as it allows distributors to identify clear trendlines and make informed decisions about which suppliers are consistently meeting delivery expectations.
Late Orders
Understanding where late orders are occurring most often can help you work with suppliers to address concerns.
Top Products By Supplier
Just as it’s helpful for you to see your top products so you can incorporate them into more marketing campaigns and sales conversations, these insights benefit your suppliers, too.
By focusing on these metrics, distributors can ensure they are working with the best suppliers and identify areas for improvement in their supply chain. This approach leads to better inventory management, greater customer satisfaction, and ultimately, more sustainable growth.
For an electrical distributor with more than 600 suppliers, reporting on product sales is a crucial part of maintaining and expanding relationships with vendors. E.B. Horsman & Son had developed its own internal systems to organize and report on data from its ERP, Epicor P21, but it was a time-consuming process.
With White Cup BI, the company now is able to run weekly, even daily, reports on its core products, something they never would have been able to do before.
Vendor scorecards make it easy to show suppliers the costs of goods sold and other relevant data — in some cases, data the suppliers aren’t able to access within their own organization.
“It has boosted our credibility, we’ve had some vendors actually emulate what we’re doing on the BI side of things.”
Availability over price reigned for a while, during the height of supply chain disruption, but with economic uncertainty and a stabilizing supply chain, customers are scrutinizing their quotes more closely.
Supplier cost increases introduce a window of opportunity for distributors to reset their pricing to achieve more significant margins. Distributors need to change how they price inventory at the customer level more than ever before. Now is the time to reset your pricing and profitability to proper levels, using data to establish the right price points for every customer that will protect profit margins.
Segmented pricing by customer and even within product groups for a single customer can make a big difference in profit margin. Customers will have core products they buy from you where pricing matters a lot, as well as other products they buy from you out of convenience. The latter group can give you more flexibility in increasing profit margin.
Being able to distinguish between these two categories and recommend related products at the right time for the right price requires sophisticated technology that helps you get more from every order.
One way to measure profitability is to compare current performance against historical performance using dual axes charts.
You’ll also want an easy way to see which customers and products are generating the most profit at a glance, and which related products customers buy most often.
But those insights are only as valuable as your ability to act on them quickly.
White Cup CRM and BI offers instant, intelligent cross-sell and upsell recommendations, turning every quote into an opportunity to maximize order value.
You can see a list of top product suggestions for a customer based on their purchase history and suggest products they’re likely to buy again.
Data visualization is a powerful tool that enhances understanding and decision-making. Each chart or graph should tell a story that results in a clear set of actions.
As you consider which metrics are most critical to your business growth and use technology to illustrate them, consider these high-level recommendations:
Ask: What story is the chart telling, and why is this important? This foundational question guides us in selecting the appropriate visualization that aligns with our objectives and communicates effectively with our audience.
Choose the right type of chart.
While a line chart is typically better for displaying trends over time,a bar chart might be more suitable for comparing categories or showing clear distinctions between groups. For example, when we look at trends such as sales performance over several quarters, a line chart would illustrate the progression more clearly than a bar chart.
Less is more.
Whether you’re presenting data to your board, showcasing it in a company meeting, or using it to plan for the year ahead, you want to provide enough detail to inform but not so much that it overwhelms. Avoid clutter and focus on simple designs to ensure your data is easy for anyone to understand.
Use clear headers and visual delineation between sections.
While it’s often valuable to see two sets of data side by side, well-placed headers and lines will help you avoid confusion. A well-designed chart or dashboard ensures that the story behind the numbers is compelling and clear to all stakeholders.
White Cup CRM and BI makes it easier to see key performance indicators and top priorities at a glance and act on them faster.
Using pre-built dashboards and scorecards along with the power of artificial intelligence, your team can immediately see your next best actions and proactively reach out to customers.
For instance, you can:
You can also make decisions with greater confidence with business insights at your fingertips, including:
Unlike generic business intelligence solutions, White Cup BI is built specifically to address the challenges and goals of distributors like you.
