About the Business
- Type of business – IT distributor
- Market – IT channel re-sellers, business to business
- Goal – to increase profits in my division
Understanding from Analysis:
Sales margins have tended to be very low in IT distribution. An average of around 6% with some re-seller accounts only achieving 2% to 3%.
Account managers paid on gross sales profit with a basic income plus commission.
Wide range of products with differing sales margins. For example PC’s only achieved 2% but network products were much higher, some as much as 15%.
There were different product managers for each range of products.
SAP was used throughout the business.
Excellent reporting available via spreadsheets.
Each re-seller had a certain amount of credit available, anything from £50,000 up to £500,000.
Effectively the IT distributor offered a large line of credit as well as a large range of products.
Action Plan
- Once all the data was analysed and a thorough understanding of each re-seller plans were gleaned the solution to increase profits became obvious.
- Because credit limits were finite, we moved re-sellers away from buying PC’s with low margins and towards Networking type products with high margins.
- Some product managers may have suffered slightly but others did well.
Eventual Outcome
We managed to triple profits from around £60,000 per month to around £180,000 per month over a two year period.
