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Partner says “vendor is not profitable” – is that accurate?

August 26, 2010

Measuring your businessAs a consultant working with Solution Providers many times I heard the business owner make statements (assumptions) about how profitable a particular product, service or vendor was. What I found is that most partners didn’t measure their business well enough to be able to make a cogent, fact based statement about any P&L by product, service or vendor. Frankly, the partners that did measure their business significantly outperformed those that did not.

When your vendor’s channel manager hears your concerns about profitability they generally are not trained to know how to respond; however, if they hear “Year to date our server resell revenue with your company is flat, rebates are lower than last year by $50,000 and our profitability on servers with you if off by 10%” you’ve given them something to work with. If they can’t help you at least you also have good information on how to manage your business priorities.

It’s important to have real time data on your entire business by total revenue stream. In the example shown its possible that a manager would focus on Services since the Gross Margins are more attractive; however,  you would want to know that a third of your bottom line is coming from hardware! That business needs to be protected or it’s going to be very painful for the business.

You can’t manage what you don’t measure. Investing in good reporting systems is essential for making your business more profitable.

Are you spending too much time analyzing your business when you should be out there talking to clients or are you not spending enough time creating dashboards and metrics to manager your business?

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