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Randy MacLean, President — WayPoint Analytics

•profit analytics •profit training •profit strategy • gross margin • business strategy • cost to serve • net before compensation • transaction counts • whale curve •profit dynamics • profit realization • price advantage • service advantage • net gain • profit ranking • client results • cross subsidies • costing system

APIC-2015s-A01

Randy MacLean, President of Waypoint Analytics, discussed the company's detailed cost and profit analysis, revealing that 62.5% of invoices in $60 billion of distribution business are money-losing. He emphasized the need to shift focus from gross margin to net before compensation (NBC) to accurately measure profitability. MacLean introduced a new costing system and a strategy to improve profitability by reducing transaction costs and targeting efficient customers. He highlighted that small companies can lead the market by adopting these strategies early, aiming for a twofold increase in industry profit rates and eliminating short-term debt and operating interest expenses.

Transcript

https://otter.ai/u/wXkDeQoXR-aJCGC8EygSRC2w3N4?view=transcript

Action Items

[ ] Attend a webinar in 2 weeks to discuss the strategy in more detail.

[ ] Implement the strategy of reforming or trading away unprofitable accounts, reducing transaction counts, and using the savings to build a price and service advantage.

[ ] Aim to have 60-70% of the most efficient and profitable customers by the end state of the strategy.

[ ] Achieve profit generation at twice the industry rates, with margins 5-10% below the market.

[ ] Eliminate short-term debt and operating interest expense.

[ ] Provide above-average pay for an above-average workforce and destroy the competition.

Outline

Waypoint Analytics Overview and Introduction

Speaker 1 introduces Waypoint Analytics, a company that calculates detailed cost and profit information for clients.

The company processes transaction data and financials weekly or monthly, maintaining two to three years of data.

Waypoint Analytics provides clients with actual P&L statements for every line of every invoice, helping them identify profitable and unprofitable orders, customers, and product lines.

The company has analyzed $60 billion worth of business and covers about 60 of the 150 channels in the market.

The focus for the year is on client results, aiming to help clients achieve massive profit gains.

Understanding Business Dynamics and Strategy

Speaker 1 compares understanding business dynamics to discovering DNA, emphasizing the potential for significant insights and improvements.

The speaker, Randy MacLean, introduces himself as the president of Waypoint Analytics and discusses his background in developing a new costing system for distribution.

Waypoint Analytics clients achieve an average net gain before taxes of 174%.

Randy MacLean is also an author and advises companies globally on profitability.

The experts at the session are there to provide services and advice to companies, and attendees are encouraged to seek assistance if they find something useful.

Challenging Traditional Business Beliefs

Randy MacLean challenges traditional business beliefs, stating that every sale does not necessarily add to the bottom line.

He explains that gross margin percentage has little to do with profitability and that sales coverage does not always equal growth.

The speaker emphasizes the importance of understanding the full range of factors affecting profitability, not just gross margin.

Randy MacLean highlights the limitations of relying on mental calculations to determine profitability, given the complexity of modern business operations.

He shares a surprising statistic: 62.5% of all invoices in distribution lose money.

Profitability and Cost to Serve

Randy MacLean explains how gross profit dollars are generated by volume times gross margin percentage plus add-ons, fees, and delivery charges.

Cost to serve is driven by transaction counts, including orders, picks, deliveries, and server costs.

The speaker introduces the concept of Net Before Compensation (NBC) as a more accurate measure of profitability, excluding sales compensation costs.

The goal is to increase gross profit and reduce cost to serve to improve overall profitability.

Randy MacLean provides a detailed explanation of how to redefine the P&L to focus on NBC and manage the business more effectively.

The Whale Curve and Realization

Randy MacLean introduces the concept of the whale curve, which visualizes profit rankings from the most profitable to the least profitable sales.

The peak internal profit represents the maximum profit potential, while realization shows the actual profit left after paying off losses.

The average realization in wholesale distribution is 25%, indicating that most companies lose three-quarters of their potential profit to dysfunctional business.

The speaker emphasizes the importance of understanding and managing the whale curve to improve profitability.

Randy MacLean shares a parable about a monkey holding onto nuts to illustrate the common tendency to hold onto money-losing business.

Strategies for Improving Profitability

Randy MacLean outlines a strategy to reform or trade significant profit drain accounts to tilt the playing field in favor of profitable business.

The goal is to reduce transaction counts and capture savings by losing unnecessary infrastructure.

The strategy includes building a price advantage by reducing cross-subsidies and aggressively pricing target accounts.

The speaker emphasizes the importance of focusing on the most efficient and profitable customers to achieve market-leading concierge service and a corresponding reputation.

Randy MacLean highlights the advantages of small companies in implementing these strategies more quickly than larger companies.

Implementing the Strategy

The strategy involves reforming or trading significant profit drain accounts to tilt the playing field in favor of profitable business.

The goal is to reduce transaction counts and capture savings by losing unnecessary infrastructure.

The strategy includes building a price advantage by reducing cross-subsidies and aggressively pricing target accounts.

The speaker emphasizes the importance of focusing on the most efficient and profitable customers to achieve market-leading concierge service and a corresponding reputation.

Randy MacLean highlights the advantages of small companies in implementing these strategies more quickly than larger companies.

Conclusion and Call to Action

Randy MacLean emphasizes the importance of understanding and managing the whale curve to improve profitability.

The speaker encourages attendees to take action and implement the strategies discussed to achieve significant profit gains.

Randy MacLean offers to run a webinar to provide more detailed information on the strategy and how to implement it.

The speaker expresses pity for companies that do not adopt these strategies, as they will be at a competitive disadvantage.

Randy MacLean wraps up the session, encouraging attendees to focus on profitable customers and implement the strategies discussed to achieve long-term success.

Audio file: APIC-2015s-A01.mp3