Richard Glikes on Making Money in CE

This column ran in the most recent issue of Azione Unlimited’s member newsletter, and is republished here with permission.

The number one written goal of Azione Unlimited is, “Deliver exceptional profits to members to ensure their long term success.” Let’s engage in a short discourse on how to make money in this industry. Here are some ideas:

1. Focus your business on a select number of vendors. It’s better to deliver more volume to a few manufacturers than spread it out. It helps you hit freight, make rebates levels, have a more fructuous business relationship, and be important to your suppliers.

2. Take every cash discount. Generally they average about 3% to 4%. It’s all pure profit and vendors love, yes love dealers who pay their bills on time! A good net profit in our industry is usually about the same as the cash discounts. After you pay everyone including yourself and Uncle Sam to net 4% is good.

3. Avoid purchasing from distributors whenever possible. They have to make money too. Generally they work on 6% to 25% margins. That’s your money if you buy direct. TVs are the exception.

4. Control your expenses. Sounds simple doesn’t it? Check at least three places for all your miscellaneous purchases like office supplies, uniforms, and insurances. Pit one against the other just like clients do to you.

5. Measure the productivity of every employee. Are you hitting the $200,000 in sales to employee ratio? Divide your total sales by the number of employees. If that number is under $200,000, you’re probably losing money or barely earning some. Over $200,000, you’ll be doing quite well.

6. Raise your labor pricing. Everyone seems to be maxed out on available labor. Scarce resources demand higher pricing. So charge more for it. Electricians and plumbers know how to make money of labor, why can’t we?

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Comments
  • Jeff Kussard

    I have tons of respect for Mr Glikes and his organization. However, I must take issue with his third point. I’ve worked for brands who include distributors in their go-to-market models. I’ve also worked for a distribution company. And, as the managing partner of a dealer / integrator, relied on distributors as logistics partners. Based on that experience I can assert there’s real value in sourcing from distributors. True there are also advantages to the dealer in complying with the demands vendors make of their direct dealers. But there are also costs. As example, annual commitments that load warehouses. Those commitments also limit a dealers ability to shop the market and meet the specific needs or brand preferences of the client. While also not a perfect relationship, working with distributors brings meaningful advantages. Such as the reduction of on hand inventory and the benefits of JIT procurement. Of course, there is much more to the topic. But, this is not the forum. To sum up, like Mr Glikes advises against working with distributors, one could question the investment dealers and vendors make in buying groups. I’m not questioning the value of groups nor advocating the dissolution of direct account relationships. Like those who buy from distributors, I know group members derive value from the cut the group gets from their purchases. And those who support direct account relationships enjoy an ROI. So unlike Mr Glikes I don’t advocate a dismissive or myopic perspective regarding the role of distributors, direct accounts or groups. Just as group members get what they pay for, many derive real value from working with distributors.