Consulting & Strategic Planning
Strategic Pricing for Distributors
The Evergreen Consulting strategic pricing process helps management regain (or gain for the first time) control of pricing. Strategic pricing has enabled distributors to enjoy a sustained gross profit improvement of 150 to 300 basis points (1½ to 3 per cent) or more.
Under traditional sales force-driven pricing methods, there is very little correlation between customer buying power, order size, and unit price. Strategic pricing segments customers based on buying power and other factors. Products are grouped based on volume, comparability and other characteristics. Strategic pricing uses pricing information from the company's transaction file history, as well as human judgment, to develop reliable pricing matrices to make order out of the company's chaotic pricing environment.
Company outcomes include not only much stronger margins but simplification to relieve sales reps of the burden on managing their customers' pricing, contracts, bids and constant vendor cost changes.
Strategic pricing has proven to benefit even companies who do much of their volume with large customers under contracts, redistributors and distributors with "elite" sales forces who have traditionally managed pricing for their accounts.
Strategic pricing is very labor intensive but well worth the time and effort. We guide our clients through each step of the strategic pricing process:
- Extract transaction data from the company's ERP system
- Analyze the data to understand the current situation
- Gauge the opportunities for improvement
- Segment customers and products
- Create pricing matrices using the transaction data and segmentation
The Evergreen Consulting acquisition advisory process is based on the proposition that a series of small, low-risk acquisitions can jumpstart profitable sales growth for distributors in almost any line of trade. The traditional "investment banker" world is too costly for smaller transactions, and typical "business brokers" don't have the expertise and experience needed. Unlike other firms, Evergreen follows a pay-only-for-what-you need philosophy, providing distributors with an experienced team on their side of the transaction. We are with our clients at each step helping to:
- develop the growth strategy, acquisition program and identify targets;
- approach and cultivate targets, determine the proper price, terms and deal structure, negotiate the deal;
- perform due diligence;
- integrate the acquisition into the buyer's business.
Customer Profitability Analysis (CPA)
The Evergreen Consulting CPA process is based on the premise that the vast majority of distributor operating profits comes from a very small group of customers that must be protected at all costs. Operating profits can be measured using a straightforward and continuously updated "top-down" system that enables distributors to rank and segment customers by operating profit potential. CPA optimizes all aspects of the business and Evergreen guides clients through each step of the process:
- Create customer profit and loss statements;
- Rank customers, protect winners and fix losers, monitor strategic but money-losing accounts;
- Segment customers by operating profit potential, establish a systematic and disciplined process for developing new services;
- Focus the business on operating profits through its sales policies, organization design and compensation programs.
The Evergreen Consulting profitability process for increasing return on sales and return on investment is based on our belief that distribution businesses should earn at least a 20-30% return on investment, and our conviction that high-profit distributors must achieve excellent personnel productivity, optimize gross margins and maximize order size. Our consultants are experienced executives from high-ROI distribution companies. Evergreen uses a multi-functional team of financial, sales and human resources experts on each project. We work methodically with our clients on the drivers for distributor profitability:
- Grow gross profit dollars and order size per transaction;
- Improve personnel productivity (PPR) to an industry-leading level;
- Increase inventory turns; reduce receivables days outstanding, and increase payables days outstanding;
- Utilize the optimum amount of leverage.
Examples of Some Recent Success
We performed the business due diligence for our client, a Midwest distribution organization, in support of their effort to acquire a large multi-location regional distribution company.
Evergreen performed business due diligence for the acquirer, a publicly-held corporation, in connection with an acquisition of a international distributor of gifts and merchandise sold at plays, concerts and museum exhibitions.
We assisted an Ohio-based client in continuing its long-term growth strategy through the complex acquisition of a multi-location industrial supplies distributor in the south.
Evergreen facilitated in the development of a strategic plan for a $50 million Midwest distribution company and assisted in the implementation of their core strategies.
We facilitated the development of a strategic plan with a heavy focus on planning small acquisitions to fuel growth. We evaluated previous acquisitions in order to improve the selection, negotiation, and integration of them.
Evergreen performed a sourcing, warehouse, and total supply chain feasibility study. We were then engaged to execute the plan that we created for the client. This involved the start-up of three new warehouses and setting up the sourcing and logistic requirements to support each location.
Evergreen advised our client, a regional floor covering distributor, on how to take their business model into new markets. We provided our client with logistics and marketing strategies and an implementation plan to expand into new territories.