3 Ways Distributors Create Sustainable Growth
How to Successfully Navigate Mountains of Data to find Gold
The distribution world has no shortage of data—sales data, inventory data, pricing data, and the list goes on and on. There are mountains of data, and distributors are often armed with outdated maps when a high-tech GPS is needed to easily navigate the peaks and valleys of data over and over for sustainable growth and continued success.
The 2-part question at hand is, what does the analytics GPS tool look like for distributors, and how can it help create sustainable growth?
First, let’s look at the three main elements needed to create a path to success that includes sustainable growth:
- Collection of data from multiple business systems to centralize disparate data (ERP, email, marketing automation, and pricing tools, to name a few)
- Distribution-specific analysis of the data to discover actionable insights
- Acting on data-driven and trackable steps to capitalize on the insights
- Measuring results to track revenue performance
At White Cup, we call this three-step process revenue intelligence. Meaning the data collection and analysis process creates actions that drive revenue if done correctly. Our software tools provide GPS-like guidance needed to turn your mountains of data into mountains of knowledge (and, better yet, mountains of money)!
The White Cup tools that provide your roadmap include:
White Cup BI: Our distribution industry-specific business intelligence tool analyzes data from multiple sources. The built-in reports and dashboards highlight what’s most important to distributors.
White Cup CRM: This tactical customer relationship management tool keeps sales teams focused on growth opportunities. The customer-specific information supports meaningful customer conversations.
Now that we’ve established the steps to create a road map for success, let’s look at three specific ways the collective revenue intelligence can drive sustainable growth, quarter over quarter.
1. Set Realistic Goals
The great adventures in history all had one thing in common: a goal. They all had clear sights on their destinations, whether it was reaching a peak, a coast, or a new frontier. The same is true of navigating the data mountains of distribution. To set goals, whether it’s for the coming quarter or year, start by looking at both your customers’ and sales reps’ past performance.
At the customer level, look at purchasing trends over the last year and see where product lines may have dropped off or increased. What influenced those trends? Was it seasonal or event-related? Our White Cup BI tool allows distributors to dive deep into specific purchasing trends to determine a course of action. After reviewing a customer’s history, the takeaways may include new opportunities for additional sales.
The White Cup BI tool offers individual scorecards for the sales reps that show past sales and highlight new deals and other areas of improvement. For example, the sales manager dashboard shows how all sales reps are performing by product line. Meaning if you have a team of 10 sales reps and nine are selling Product X like gangbusters, but one rep isn’t selling much of that same product, the resulting action is to work with the rep to understand why Product X isn’t selling as well. Does the sales rep need additional training on Product X? Is there a conflict between the customer and Product X? Is it something else? Identifying these shortfalls leaves money on the table that could easily add revenue to the top line.
2. Increase Revenue by Understanding GMROI
As a distributor, inventory is one of your most significant investments. After all, you are buying merchandise with the hopes of selling the product at a profit. The gross margin return on investment (GMROI) is an inventory profitability formula that analyzes a company’s ability to turn inventory into cash profitably.
Why is this so important? Calculating your GMROI is like a litmus test of how financially healthy your business is. Once you know your GMROI, then you can use this data to determine the next steps. Here’s the standard formula for determining GMROI:
There are several benefits of knowing GMROI, but two of the most valuable indicators coming from GMROI are:
- Determine if a product is profitable and worth keeping or modifying its inventory investment
- Negotiate better product pricing with vendors
Now that you understand your gross return on investment, you can continually monitor it as a key performance indicator (KPI) to ensure it’s meeting the standards you set for the revenue performance of each product or product line you sell.
3. Driving Cash Flow
Cash flow is the lifeblood for distributors. It is a balancing act that requires constant attention. Striking the right balance between meeting customer demands while building loyal relationships with manufacturers is no small feat. There are four ways to improve cash flow from your distribution business:
- Vendors
- Inventory
- Margin
- Expenses
Within each category, there are ways to gain additional cash flow based on individual organizations based on market share, operational setup, and sales team, but here are ways distributors can take action immediately.
Vendors
Can you free up cash flow by adjusting your payment terms? For example, most of your customers pay you on a 30 or 60-day cycle. Do the same with your vendors. See if they can stretch the 30-day payment period to 45 days. This process will free up some liquidity of your cash flow.
Inventory
The less inventory you have on hand, the more cash/liquidity you have. Look at your product mix versus sales cycle and see if you can buy less stock more often to stretch your money.
Margin
Look at your customers and their buying cycle versus profit margin. Even raising the profit margin on your products sold by one percentage (1%) is negligible enough that the customer can easily absorb it while being a significant gain for you.
For example, in a White Cup BI dashboard, you can look at the pricing dashboard and see what sales reps are giving pricing discount overrides and how often. The same dashboard also allows you to see how many of your customers are asking for pricing overrides and easily identify declining sales and the types of discounts those customers have received. At this point, you’ll be armed with the correct information to determine the best steps to take to make them a more profitable customer for the long haul.
Expenses
Finally, driving sustainable growth means keeping expenses under control. Revenue Intelligence tools like White Cup BI and White Cup CRM provide answers to get a 360-degree view of your business and improve operational efficiencies. For example, the expense trends dashboard shows you the top 10 expense accounts both month and year to date. In turn, this information helps you quickly identify spending trends and areas where cost-cutting can be effective.
In conclusion, while there are many ways to drive revenue for sustainable success, we’ve touched on some of the highest peaks of turning data into results. Contact us if you’re interested in learning more about how White Cup can help your distribution business navigate revenue intelligence like Magellan.
