With the news that high street shop closure rate hit 14 a day in 2011, merely confirming the evidence of our own eyes, pragmatic account managers need to leave re-invention of redundant business models to politicians and the taxpayer, and instead focus upon how to work around customers’ on the brink of insolvency, whilst attempting to maintain their own solvency…
If your customer goes bust
Bearing in mind that if a customer owing £150k to a supplier on a 5% net margin goes bust, then the supplier needs incremental sales of £3m to recover the loss, it is obviously in NAMs’ interest to improve their ability to recognise the signs of a customer in financial distress and take adequate precautions. How to spot the signs
Stress-auditing your customer-portfolio
In practice, this means assessing the financial health of the customer portfolio and conducting ‘what-ifs’ on possible casualties. If replacement sales cannot be found via the stronger players or alternative channels, then the company will need to reduce forecasts and make appropriate budget adjustments.
For realistic NAMs, this unprecedented environment whilst painful, is simply another market scenario, and business is about being able to perform as well as, or better than competitors operating in the same market conditions.
Despite the fact that confronting ‘doom and gloom’ may be seen as demotivating, we sincerely believe that in the current climate, the NAM role in 2012 is about being able to face up to and optimise reality, failing which someone will do it on their behalf. It is about being able to perform as well as, or better than, equivalent companies in the marketplace, whatever the circumstances…
As always, business survival and success is about achieving a balance of risk and reward, measured in terms of achieving an adequate profit on the money put at risk in a business. In other words, being able to achieve at least 15% return on capital employed. This is driven by net margin and rate of capital turn. As you know, businesses are either high margin coupled with relatively slow stockturn (cosmetics) or narrow margin and fast stockturn (dairy products), and the key for NAMs is to understand their business model and drive it appropriately. Incidentally, comparisons with equivalent companies in supply and retail can be made via Companies House or other open domain data.
Working realistically with business reality
Either way, it is crucial that suppliers find ways of working around the problem of dealing with companies on the brink of liquidation. The resultant mind-focus will make NAMs very decisive in terms of realistic assessment of customer risk, more sparing in their application of trade funding, more conscious of the incremental sales required to recover investment in their customers and ruthless in their demands for demonstrable compliance in a fair-share partnership.
In other words, if you can make it in this environment, nothing, repeat nothing, will ever be more challenging….or satisfying