If Your Margin is Eroding, It’s Time to Act

The last few years have been an odd time.  Even with the shutdowns, supply issues and all the other challenges…there has been a silver lining.

A lot of distributors used rising costs to put some of the increase in their pockets.  In fact, most wholesale sectors show strong sales and margin results for the past two years.

The Fun May Be Coming to an End

There’s nothing like an extra point of margin to turbo charge a business.  It lets you be more competitive.  But that means you may take on extra overhead that can be hard to shed.

What goes up can come down.  This year, many see a step down to normal margins as inventory costs catch up and supply comes back.  We talk every day to HVACR, Electrical, Plumbing & PVF distributors who face declining margins.

What If You Could Maintain & Grow Your Margin?

Your margin may have gone up, but it wasn’t just circumstance.  You probably took actions which let you profit from macro conditions.

Being proactive makes all the difference.  Now is the time to take action to optimize your pricing system.  It can mean a point or more of margin for your company.

Here are 4 suggestions to preserve and grow your margins.

  1. Evaluate Every Pricing Record – How long has it been? Most distributors pricing is like my basement.  My wife and I bring stuff in all the time, but seldom toss out the old.  Here is where less may be more.  How much has the world changed since your pricing was set? One thing is sure…you’re too high on some prices and leaving money on the table elsewhere.  We can help you pinpoint and fix the issues.
  1. Make Money on Your Data – Almost every business uses its sales data to figure out how to maximize sales and profits…are you? You own a valuable resource, your sales data.  Mine the data and use it to know where you must be competitive and where you can make more…down to each item for each customer.
  1. Check Your Supplier Rebate/SPA Support – Each day, we see cost data from our clients. The shock for us has been how much difference there is in support among similar distributors.  Optimizing rebates is like everything else.  Those who make it a priority and work a plan end up with lower product costs.
  1. Get More Control – There’s an old saying that a rookie Sales Rep. has more control of pricing than the CEO. You can’t afford to give up control over how you price.   Don’t kid yourself that your people know the market and where to price each sale.  At best, they know how to price competitive items for their large customers.  They leave money on the table on less competitive sales.

 Don’t Give In.

Act now.  Don’t let your margin erode.  Sure, your team has more than enough to do.  But what could be more important than a point plus of margin?

Will Roller is a Partner with Profit2, a 23-person firm founded by distribution executives, focused solely on helping distributors build margin by improving how they price.

Published On: July 27th, 2023 / Categories: Articles /