Joining the Borg Collective
Tuesday, February 27, 2018—In the Star Trek series, the Enterprise encounters a very dangerous entity call the Borg Collective. The Borg grow by absorbing and consuming everything they encounter, assimilating whatever worth there is and making it part of themselves. Whatever they assimilate is put to work solely for the benefit of the Borg, and nothing else.
Perhaps the greatest risk to the profitable growth, independence, and ultimate success of a distributor is a relationship with a customer that's like the Borg Collective.
These companies operate differently than your "normal" customers do, expecting you to handle very large numbers of small orders, provide and fund additional logistics, and waive or modify the policies that normally protect you from losses.
Of course, all this will be attached to unusually-high sales volumes, making the inevitable losses hard to predict, absent sophisticated cost analysis system like WayPoint Analytics.
When you win one of these accounts, your vendors sure to like the larger volume, and you inevitably add new personnel and infrastructure to support the increased business. The excitement of winning the big account fades, though, as you encounter unexpected cash-flow challenges, and your normal profit rates plummet.
Working for the last decade with many, many distributors, we've seen this repeatedly in the millions of analytical reports the WayPoint system has provided for our clients. Our clients can clearly identify the accounts that hurt profits, and can see what causes the losses. Taking action on this information has produced some magnificent profit gains.
Here's what you can do…
First, learn to identify accounts that look like the Borg Collective.
You'll notice some things that help identify them. These are not companies like yours. Often, they've cobbled together a significant market position by acquiring companies and bringing them under one umbrella. They'll most likely be a public company, or owned by an equity firm or fund.
Their people will be "corporate" animals – middle managers that come and go – far-removed from serving customers or signing paychecks. They'll have no idea how your business actually works, and no particular concern for your company's success or survival. They will, however, be very focused on the next quarterly report, or their next internal meeting.
In other words, they won't have the kind of entrepreneurial roots you have, so they're not going to understand or be particularly concerned about your company's needs.
Second, make sure you have management guidelines and policies to prevent adding the customers you've identified, who look like the Borg Collective. Accounts that require exceptions to your normal policies or processes should not be added without first doing a detailed cost analysis.
Third, begin to develop plans to replace your current Borg Collective accounts with other accounts that operate more efficiently. Alternately, implement new internal processes that reduce manpower and other costs so you can continue to serve these accounts without losing money, and negotiate more favorable terms where losses are otherwise unavoidable.
Getting to work on this right away will substantially improve your profit line, and protect your company from being integrated into the Borg Collective.
The takeaway? Certain customers have a business model that promises high volumes, but with order-size or service requirements that guarantee losses for you. Relationships with these customers drain your profits and when the relationships end, leave your company reeling and vulnerable to competitors or complete collapse. Learn to identify and avoid these accounts. For those that have already entered the gates, analyze your costs and reduce them through automation, improved processes, and alternative lower-cost methods. Make a plan to replace those accounts with others that represent fewer larger orders, and aggressively target them. Make higher profits your priority by beginning on this today.
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