Focus of Market Share, Aftermarket Success, and Financial Stability, of course, Market Share is one side of measuring your sales activity. Whether you call them distributors or dealers, they purchase your product and sell it to the end-users. They are the marketing arm of your organization, and just like any sales organization, they need management. In simple terms, you have three groups of distributors: the top performers, the middle or average, andfinally, the low performers.

Your top performers need help and assistance, but they probably drive you for support. They still take time and can be demanding, but they deliver. They are almost always worth the effort. You are driving your low performers, but sometimes they still don’t deliver. It behooves you to analyze their problems. Are they:

• A weak sales organization? Do they know how to prospect, quote, and close?Can you retrain them?

• Are they not willing to be price competitive in their market?

• Are they not focused on selling your product? Do they have too many brands to give you’re the attention your need from them?

• Are they not technically capable of presenting and closing on the features of your product?

We can work with distributors and analyze these issues and work with you on how you resolve these obstacles.

Aftermarket Sustains the Distributor - Absorption

While you want your distributor to sell your equipment, it is certainly in your interest that they continue high-quality service and a significant parts volume. There are several reasons, but let’s mention one that benefits you. When the distributor is capable of maintaining 100% absorption or better, they are less likely to fight the competitive pricing in their market. That means your product will sell possibly at tighter margins in their market, but because it is competitive, it will sell. What is absorption? Why do we say it’s important to you?

Absorption is a calculation at the distributor level adding the parts gross profit to service (and rental) gross profit and dividing that number (total aftermarket gross profit) by the total expenses of their company. What it tells you is can this company survive when the equipment sales are high or low. That means they can afford to operate without depending on the gross profit of their equipment sales to cover major operating expenses.

Therefore, a distributor who sells a significant balance of service, parts (and rental) is strong enough to operate without holding out for hefty profit in prime equipment sales. They can afford to be competitive when they need and can sell with tight margins when they need to get the deal.

Financial Strength is Measurable and Important

Great products, market share, and energetic sales staff are great. Still, if the distributor can’t put net profit on the bottom line to finance debt, pay shareholders/owners, and finance the growth of the company, the distributor will not survive. There is no straight forward metric for all distributors. Because the sales mix can be different base on their market, sales staff, available technicians, and many other things, the benchmarks for a well-performing distributor vary based on their sales mix and type of industry. You should know what those benchmarks are for your distributors within your industry.