I recently had a brain storming session with a long time Executive Focus client of mine that is a distributor. The topic was about how to increase sales. Our approach was to focus on the well-being of their dealers. What could be done to help their dealers become more profitable thus inciting sales? Managing their businesses using Executive Focus as a tool came to the forefront.
As a starting block, my client asked me to put together a list of some of my best business practices to discuss with their dealers to help them manage their businesses better. These are a few that come to mind:
1) Establish monthly budgets. These need to be set for the year and variances need to be monitored each month.
2) Know your Break Even point. This not only helps determine the amount of sales needed each month to break even, but also how profitable you are beyond your breakeven sales.
3) Monitor your Cash Conversion Cycle. This is a key metric that expresses the length of time in days that it takes for a company to convert its investments in inventory and other resources into cash flows from sales. Reduce this metric and your company will become more liquid with cash.
4) Monitor your Gross Profit %’s. This needs to be done not just at the top financial level, but also amongst your different products, customers, territories, and salespeople.
5) Benchmark your metrics. First, you need to establish and create your own key performance indicators or metrics, then you need to monitor them, and most importantly comes the evaluation. This can be done against your budget or past performance but benchmarking against your industry can provide even more vital analysis. The problem is that sometimes industry data is unavailable, not comparable or not specifically dialed into your niche. Since the dealers are spread throughout the U.S and do not compete, my recommendation is that CDH creates dashboards that display the established key metrics using the dealer’s actual results with their names and results being anonymous.
CDH’s Executive Focus is an excellent solution for helping your business manage and monitor your business. Executive Focus is a visualization tool that provides transparency within the organization and empowers people with knowledge by helping them have a better understanding of all departments within the business. How do we do this?
• We develop a custom set of business metrics that represent your organization’s function as a whole.
• We focus on Key Performance Indicators (KPI’s) that clearly reflect efficiencies and value add capabilities.
• We facilitate monthly management team meetings to highlight and discuss the trends and relationships in your results to drive a culture of continuous improvement.
Benchmarking Metrics Using Dashboards
Matt Wirth is a Senior Consulting Manager for CDH, a national accounting and consulting firm. He has been consulting with privately held companies for over twenty years. CDH provides a service called Executive Focus. This service offers a process, tools and support to help management teams improve their performance. They design custom graphics packages which identify trends, relationships and performance drivers. The net effect is a system that fosters continuous improvement and enhances the bottom line. Matt has a BBA in accounting from the University of Wisconsin-Milwaukee and is a CPA.
If you would like to learn more about the CDH Executive Focus process please contact Matt Wirth, Senior Manager (mailto:[email protected] or 262-784-4040).