Distributors often find themselves in a tight spot when it comes to profits. With suppliers in control of the cost of product, how can you carve out profits for yourself while keeping customer satisfaction high?

For the real winning teams, the key is knowing your numbers, how to spot the right opportunities and how to talk with your suppliers to make it all work. Your data is the scoreboard and, right now, it’s telling you the profit is hiding.

When you finally see the patterns — outdated supplier pricing, inefficient order cycles, freight creep, missed discounts — you stop playing defense and start driving the ball downfield with confidence. 

Negotiation is easier with the right information

We find that distributors aren’t always as profitable as they could be for a few reasons: 

1. They’re overwhelmed and don’t have time to analyze their supplier pricing — they’re playing without watching the film. CEOs of growing distribution companies have a lot on their plate and can get complacent on negotiation. In some cases, it’s been four or five years since they looked at what they’re paying. They’ll tell me, “We have the best price,” and I’ll ask, “Based on what — intuition or data?”
2. They have a solid purchasing team in place, and they trust them (as they should). But even strong teams sometimes are so focused on getting quality products in at the right time that they aren’t tracking costs like freight or the potential for volume discounts. Often the daily grind of making sure they have what customers need blinds purchasing teams to cost creep. 

But you often have more plays in your playbook to increase profitability than you think. For instance, many distributors overlook minimum order sizes. Your suppliers running orders monthly instead of once a week might save significant overhead when you factor in your costs to take the order, process it and set it up in production.

In that situation, keeping multiple weeks’ worth of the order on hand means your customer will get it faster—and be happier with you. You might even be able to raise prices in exchange for that swifter service. All it takes is communication and the right data.

Use data to have more productive conversations

As a busy business owner, you probably don’t have the time to crunch the numbers on situations like that — which is where a Fractional CFO comes in. Think of us as your offensive coordinator. 

Sometimes it won’t make sense to order more volume to lower the cost, and a Fractional CFO will analyze the situation to help you figure out which levers to pull to increase profits while maintaining a great supplier relationship. We can study the defense (your supplier’s pricing structure, your customer demand pattern and your cash flow) and get you a better deal with your supplier because we’re armed with information you might not be able to come up with on your own.

As experienced financial leaders, Fractional CFOs are data-focused by nature. We know how to read the scoreboard and the stats that actually predict wins. With our deep, diverse experience as financial leaders, we can find opportunities to improve cash flow, examine pricing and a whole host of other changes that will benefit your distribution company. 

Communication is the key to a successful business

But Fractional CFOs aren’t focused on data only. The financial side of your company overlaps with every other aspect from operations to IT to HR, so we’re there to help you communicate the importance and implications of your financial data to those teams to improve how you operate. We’re your partner in growing your business, and we use our financial leadership expertise to support you as you lead the company. 

If you’re a Kansas City-based distributor, one of the experienced financial leaders at Crown CFO can help you find ways to uncover more profitability even as costs increase. Contact Kerry George at kerry@crowncfo.com to bring a trusted, expert Fractional CFO to your business.