As distributors prepare for 2015, they must look beyond figures like gross margins, sales revenues or how much their customer base has grown or shrunk. That’s because a number is not a plan, says Steve Deist, partner at Indian River Consulting Group and 20-year industry veteran, who spoke with me about planning for the new year for the latest MDM Executive Briefing, available now.
Deist said relying on numbers can tell you where your company has been, but it doesn’t provide a trustworthy roadmap for where it’s going.
“Financial statements and financial reports generally don’t provide the level of insight that you need to develop a real plan,” Deist said. “A lot of people confuse the term budget and plan. They think 'If I’ve got a number or goal, that equals a plan,' but they’re two different things. The budget is what you want to accomplish and the plan is how you’re going to do it. You have to look at some alternatives beyond the numbers to figure out what your plan is.”
Deist said the first step in planning for a new year is not compiling a list of things to accomplish but deciding what your company is not going to tackle in the next 12 months.
“Focus is the essence of success, especially in the distribution business where we’ve only got 25 or 30 percent margins to play with,” he said. “We can’t do the things that manufacturers can do because they have a lot more money to do a lot more things.”
Deist said investing a lot of time and money in a long-term project, such as installing a new CRM software program or undertaking a comprehensive pricing project, often means the return on that investment may not be realized until much later – or not at all.
“Long-term projects suffer from high failure rates,” he said. “The longer a project lasts, the more likely it is to fail.”
Listen to the entire interview with Deist here.