FALL 2019

50 THE DISTRIBUTOR’S

50 THE DISTRIBUTOR’S LINK Nelson Valderrama Nelson Valderrama is the CEO of Intuilize, a software Service platform that specializes in helping mid-sized distributors transform data into profits. With more than 22 years’ experience as P&L manager executive for major PE firms and industrial distributors. Nelson has dedicated his career to help business uncover hidden competitive advantages and unleash the power of data in the new Digital Economy. For more information contact by email nelson@intuilize.com or visit www.intuilize.com YOUR PRICING IS THE KEY TO UNLOCKING FASTER GROWTH - PART 2 In my last article, I talked about the massive opportunity facing industrial distributors who understand the upside of focusing on their pricing as a growth lever. Far too many distributors are getting tied up only with pushing volume, while in fact, the numbers actually suggest that optimizing pricing can produce 3-4 times greater profit growth than volume adjustments alone. In this issue, I want to dive into some simple frameworks that will help you better categorize your current organizational practices, and find simple opportunities hidden in the data you already have. Which Club do You Belong To? Depending on your passion around margin and pricing, your company might fall into any of the following buckets: The Inertia Companies that belong to this group firmly believe that the way they have been doing things for years (some for decades) is the way to do business. Pricing is a magic recipe for them, built on best costs, a target GM%, and a tribal guideline that their sales people need to apply. If at month end the GM% is better or higher than expected, they believe it has to do with the tough negotiation they had with a vendor a couple of months ago or maybe they are selling parts with greater GM% which reinforces their idea that their business model is working. Some individuals contributors (the curious ones) might have their own report or excel files to keep track of things, but companies that belong to the Inertial club almost always fail to backup their intuition/experience with data. Bottom line, this club wants the ball to keep rolling without tinkering or toying with anything too complex. CONTRIBUTOR ARTICLE The Play-Hards The sales teams for the companies that belong to this club are hard workers, have great individual contributors that have decent account penetration, and have conversations that revolve around increasing volume and/or finding new opportunities. This group’s pricing philosophy is based on the same principles as the Inertia team, but the difference is that the owner and/or the finance/ops guys are somehow monitoring the GM% at the customer level and manually trying to spot anomalies. These teams can spend hours lost in multiple excel reports before they wonder if there is a better way to do this, but they are so busy working hard, they do not have time to explore new solutions. The Work-Smarts In this camp we have companies where the owner and/or GM is a visionary that protects the current business but invests time to collaborate with her/his team to expand their business. The companies that belong to this club have developed (or are working) to have in their ERP pricing built-in, so every line quoted has the best price coming from the aggregation/iteration of decades of commercial intelligence from the most experienced salespersons. For these teams there are no surprises at the end of the month. They know how they made money and more importantly, when people leave or retire from these companies, the owners don’t have to freak out because the tribal knowledge is gone — instead they can confidently ove forward knowing the data lives in their systems for anyone to use. As I said, these GMs or owners are visionaries. CONTINUED ON PAGE 130