Jonathan Byrnes, senior lecturer at MIT and author of new book Islands of Profit in a Sea of Red Ink, recently spoke with Editor Lindsay Konzak. Here is part 2 of that interview, covering steps distributors can take to make unprofitable business profitable. He also addresses how to incentivize your team to make these critical changes to how you do business.
MDM: You write in your book that 40 percent of every business is unprofitable. How can distributors make the changes necessary to reverse this?
Jonathan Byrnes: There are four building blocks. The first is the right information. In Chapter 6 I talk about profit-mapping. That will give a company information on the specific products bought by customers. That information can be put into a database program on the profitability of each one, and the company can figure out the best measure for profitability. By the way, that information can be developed by two people within a month or two. … I’ve done that with multibillion-dollar companies.