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Welcome to The Distributor Board's second newsletter.
We conducted a survey in January where we asked a number of distributors two questions:
What is your sales projection for 2010 versus 2009?
What are the primary reasons behind this forecast?
We are happy to report that all respondents expect 2010 to be a better year than 2009. Given that most economists are predicting a continued improvement in business conditions, this is probably not much of a surprise. What is more interesting is the magnitude of the projected increases. While 50% of our replies expect an increase of less than 10%, the others ranged from 10 to more than 25%. These are very encouraging numbers although the caveat has to be that these are industry and market specific. Your market and industry may be very different.
Two primary reasons were cited for the projections:
First, the improvement in the over-all economy.
Second, new product introductions.
Our view of the over-all economy is that most industries hit bottom sometime during 2009. Distributors serve a very broad spectrum of manufacturing and service companies, so the macro-economy is a good indicator. We have not spoken with or heard of any distributor who expects a worse 2010 versus 2009.
New product introductions, line extensions, or new lines are key components of growth for distributors in any economy. So it is not surprising that they are the second major factor cited by our respondents. However, there are risks and rewards. Adding a new line can appear to only add incremental sales and the resulting profits, but the savvy distributor knows better. With a new line comes the potential cost of inventory and the education of your sales team regarding the new line. Often, you need to incent your team to sell it into their existing accounts. Line extensions and new lines can be a source of growth, but analyzing all of the pros and cons before making this decision is critical to its success.
It should be noted that even with the projected growth, 2010 will likely not approach the best years of the past decade, 2007/2008. There are strategic implications that need to be considered in 2010 to insure that the growth is as productive as possible:
- Do you have sufficient staff to support the projected increase in sales?
- Should you consider building some additional inventory?
- Can you financially support increased receivables?
What if your expectations are not as good as the survey results? You need to determine why your business is not growing this year:
- Is it market or product related?
- Have you been losing customers or specific bids to competitors for pricing or service reasons?
- What have you been hearing from customers directly or from your sales reps?
Final thought: As you move through what promises to be an interesting year, are you growing the value of your company?
Let us hear your comments. We welcome your feedback! |
