Longtime industry consultant Al Bates started his “Distribution in the 21st Century: An Analytical Perspective” presentation at the recent 88th annual Southern Wholesalers Association Convention with a question. “How many people would like to make more profit than they make?” he asked.
Not surprisingly, the conference room at the Hammock Beach Resort in Palm Coast, Fla., quickly was filled with raised hands.
Bates held court for the majority of the convention’s first afternoon educating SWA members on a variety of statistical measuring tools to help increase profits.
For example, Bates stressed companies should look at operating expenses and gross margin — together — as key drivers to greater profitability.
“God is sending you a message,” he said. “Those two have to be together.”
Bates cited a recent study of distributors that his firm, Colorado-based Profit Planning Group, conducted with almost 900 distributors across 17 lines of trade. “In every industry we looked at, the relationship between gross margin and operating expenses is there,” he says. “Driving higher profits requires focusing intently on the interaction of gross margin and operating expenses.”
Bates also suggested implementing a sliding sales commission scale for sales team members. “If you are paying your salesforce a percentage of gross-margin dollars and it is a constant of GMD, they are driving you into the sea,” he said. “They are killing your particular business. Try profit-based commission rates. When they cut the price, the rate doesn’t stay the same. It goes down pretty quick.”
During the convention general session, attendees heard from economist Todd Buchholz, who during his keynote address gave his thoughts on the current oil-and-gas market. “My fundamental feeling is $50 (per barrel of oil) is about right to see the oil-and-gas drilling spigot turned on again,” he said. “It needs to be more than $50 for more wells to come on line. I don’t see a very strong reason why oil needs to be at $75.”
SWA attracted nearly 800 attendees to this year’s event on the Atlantic coast of Florida. That number included 51 distributors and a total of 124 suppliers and manufacturers rep firms. “SWA is as healthy as it has been,” outgoing SWA President Brendan Donohue (Cregger Co.) told the group. “I attended my first SWA convention in 2004 and can’t imagine what life would be like if I didn’t participate in this organization. This group provides a pertinent forum to advance our collective goals. This is the time and place where we pull together as a community to come up with strategies to promote and maintain our way of life and protect and promote our industry of wholesale-distribution.”
During the general session, it was revealed former ASA and SWA President Dottie Ramsey (president and COO at Modern Supply) is retiring from the Knoxville, Tenn.-based distributor on Jan. 13, 2017 after 51 years in the industry. For more on Ramsey’s retirement, read new Supply House Times contributor Mary Jo Martin’s column in this issue.
Additionally, a scholarship through the association’s Leadership Development Council has been created (open to any SWA member and their families) in Ramsey’s honor — called the Dottie Ramsey LDC Scholarship.
The 89th SWA Convention takes place June 25-27 back on Hilton Head Island, S.C. Winsupply/Noland Co.’s John Simmons is the incoming SWA president.
This article was originally titled “The numbers game” in the August 2016 print edition of Supply House Times.