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The practice and the accompanying benefits of line productivity analysis are hardly new.

Consider the description of the process and the advice offered on the subject earlier this year by MANA’s Charles Cohon during the MANAchat described elsewhere in this issue of Agency Sales.

In addition, the subject was discussed and analyzed in depth in the Operations Manual for Manufacturers’ Representatives Firms, a lengthy publication produced with MANA’s assistance in 2006. In that manual the following endorsement for line productivity analysis was offered: “Regardless of the size of your representative firm, knowing and understanding each line’s profitability is a must. Without this knowledge, you may be focusing your company’s efforts in the wrong direction. Any method of analysis can be used, separately or together with others, but some measure should be used and used proactively. Having a better understanding of what lines are profitable is essential to the success and growth of any representative firm and should become a part of the culture of your firm. The analysis should be conducted on an annual basis at a minimum, and on a quarterly basis if possible.

“The knowledge you gain from a profitability analysis can do nothing but increase your awareness of what each line represents to your firm and how a line’s relative importance changes from year to year. From the analysis, you should be able to determine:

• If you are truly making a profit on an individual line.
• Which lines are paying the bills.
• If you are spending too much time on a particular line.
• If the amount of time spent on a line is an asset or detriment to your firm.
• Which lines are slipping in terms of commission.
• Which lines are ‘high pain and high maintenance.’

“A better understanding of line profitability will also help improve your relationship with principals. Your awareness of how important they are to your firm will be beneficial to all. In addition, you can use the analysis to focus your salespeople on selling what is profitable for them and the company.

“Profitability can be measured many ways, to one degree of accuracy or another. In the final analysis, however, you can relate a line’s profitability to how much time the line demands per dollar earned and how well it fits with the rest of your line list.”

Resigning Lines

Interestingly, taking that advice to heart, two years later, a MANA-member firm announced in Agency Sales that “…it was ending its relationships with several manufacturers and focusing its efforts on working with eight remaining ‘premier’ suppliers. According to the rep firm, this was done as the result of industry feedback with the goal of dramatically increasing customer service, end-user activity, specification, and demand creation.”

In explaining the decision to part ways with five long-standing, largely successful lines, the agency’s president said this decision “…will allow us to reposition our resources and assets towards the aforementioned premier manufacturers. With fewer lines to sell, our salespeople will have a more-focused product expertise, enabling them to effectively drive new products sales, which is crucial to distributors’ sales growth and profitability.

“During the course of the process, one of our goals was to identify that which we were truly good at. We didn’t want to be just okay or mediocre at anything — we wanted to be excellent. Once we did that, we had to determine what to do about it.”

Once having come to the conclusion as to what was going to be good for the agency, its customers and principals, the agency management moved on from some of the manufacturers it had successfully represented for years in order to focus on others. “We take great pride in the fact that we’ve been able to hit the quotas for the lines we represent, However, it’s very difficult to do so on a regular basis when you represent 14 or 15 lines. Invariably you and your team are going to be diluted.”

Arriving at the decision to end relationships was difficult, according to the agency president, “…because over the years we had developed close business relationships with some of the companies we no longer will be working with. But throughout the entire process, we followed our goal to make the best business decisions for us and the other people we worked with.”

In conclusion, when asked whether there might be anything other reps could learn from the moves made by his agency, the rep said, “There are so many unknowns in our business lives that we have no control over. The bottom line is that our destinies aren’t necessarily in our hands. That’s why it’s always so important to make the decisions you feel are best for yourself and your company. Then you just put faith in yourself and move forward. That’s what we’ve done, and we’re confident it will work positively for us, our principals and our customers.”

Those words sound very familiar to what MANA’s Cohon offered during the MANAchat earlier this year. If anything, it gives credence to the axiom, “The more things change, the more they stay the same.”

MANA welcomes your comments on this article. Write to us at [email protected].