I always loved the first few months of working in a company, you get to find all the easy wins with regards to making a difference and providing growth. One of the things that has never failed to amaze me over the years is the lack of focus on poor performing accounts. I’m not talking about the accounts whose sales have plummeted, or those that don’t spend as much with you as they do with your competitors, they stand out a mile and are picked up pretty quickly in the standard analysis. I’m referring to the accounts that have over time, decades in some cases become “the silent margin assassins”.
These long term accounts have managed to turn the fruits of your labour into a commodity buy, they are wrapped up in all manner of special discount structures and rebates, meaning that it’s very difficult to see the real net performance of the individual account. Often these accounts contribute to the top line sales number quite significantly, but they cause all manner of hidden problems to the bottom line when you dig deep enough.
I have seen accounts that when you really got down to it, you would have been almost better off writing them a cheque each year and not supplying them!!
Of course, its not always that simple, even an account that has poor margin performance is contributing to the overheads of the business and so improving the profitability from that point of view, but its worth asking the question, if you were to come across that opportunity right now and to win it you had to quote at the level you currently supply, would it pass your current pricing structure expectations, would you really want the business?
The truth is, if the purchasing team at the customer end has done their job well then they may well have wrung every last bit of discount from your and then some, so the tricky question is – how do you address this?
There is never a one size fits all remedy, but essentially, the first steps are analyzing your accounts one by one, even down to item by item level to truly see how they are performing, and how they are affecting both the top line and bottom line. There are also a host of other things that need to be taken into consideration with a careful and structured approach, but we have the experience to help you do this and then formulate a plan to address.
Can you really afford to keep losing cash from bottom line? Do your pricing structures really incentivise growth, are your rebate schemes really self funding? Let us help!
At The Clay Partnership, growth and building relationships is not complicated, it should be simple, we work in the background, with our customers to make them the heroes, not us.
Get in touch to see how we can help you.
