The past few years have been difficult for leaders who had to decide which operational expenses to reduce to help save the jobs of people who are part of their “distribution family.” Unfortunately, training is one of those areas where “cuts” work against both the long-term and short-term health and profitability of your company.   

Even in tough times, training cuts seem shortsighted in the long-term:

• Training plays an important role in helping a company survive a tough period, make a quicker recovery, and take market share.
  
  
• Training can identify improvements in operating systems and opportunities for more efficiency and profits.
  
  
• Training can help you keep your best employees who historically look for improved employment opportunities as the economy recovers. 
  
  
• Training is a key component of any company’s “succession plan” to ensure that 70 million retiring baby boomers are seamlessly replaced.

 

In the short-term, training cuts are myopic because training protects profits from profit-killing behavior. Let’s look at a few actions you can take to quickly and directly connect training to improved profitability. You might call this “how to avoid leaving piles of cash on the table.“

Identify areas with the best potential for improvement

1. Compare your company’s performance to ASA’s Operating Performance Report. Looking at areas such as gross margins, sales growth, cost of goods, and operating expense where the high-profit firms excel, as well as the personnel productivity ratios, can be useful.  

2. Evaluate your activities, such as safety and security, where the cost of ignorance is especially high. Activities that result in loss of work days, injuries, fines, and lawsuits are worth a high level of attention.  

Targeted improvement numbers don’t have to be huge. For example, the Essentials of Profitable Wholesale Distribution© demonstrates that a 1% performance improvement in pricing can yield a 47.5% improvement in profits; a 1% improvement in the cost of goods sold can yield a 37.5% improvement.

Develop a strategy to improve the numbers you have selected

What does bad behavior cost? Using the OPR’s wholesaler average net profit of 2%, a $5,000 sale will yield a net profit of $100. Giving a 2% discount on that sale wipes out 77% of its net profit. That’s a behavior you want to change fast!  

Poorly trained salespeople with bad pricing behavior leave piles of your money on the table! Those employees will cave on pricing, fail to understand the basic math of discounts, and fail to profit from information about the price sensitivities of different customers, customer groups, and products.

Implement training to enable the pricing behavior you want

Your plan might include the following:

• Develop an understanding of the relationships among sales, margins, and profits
  
• Present the value of your services and your prices confidently
  
• Improve the ability to present the value proposition
  
• Develop confidence in the fairness of your pricing
  
• Develop the ability to exploit price sensitivities of various groups and purchasing situations.

ASA is your partner in profitability

So, you get the point.  Untrained employees can leave sacks of your money on the table. Training can help you get much of it back quickly. Although finding the right training is hard work, much of that effort has already been done for you. You have a powerful ally in the ASA Education Foundation, whose courses include profit builders for your company. We can help you with your training; just give us a call at 312.464.0090.  

Next month, we will share several factors and tools that will help make your training work.