Margin Growth of 34.6% for a Construction Wholesaler
We changed the discount system and introduced customer segmentation, which saved the company's profit during the off-season.
A wholesaler from Pruszków was losing money on every bag of cement sold on promotion. Instead of fighting for empty turnover, Mazowiecki Inkubator Rozwoju helped them fight for pure profit in the account.
The challenge
In February 2024, the margin at Bud-Max fell to 11.3%. Sales reps were giving discounts to everyone who walked into the office just to avoid losing a customer to big-box stores. The company served 216 regular customers, but as many as 48 of them generated real losses due to free transport and 60-day payment terms. Fuel costs and maintenance for three delivery trucks rose by 19.4% year-over-year, which completely ate up the generated profit.
Our approach
We thoroughly analyzed 1,842 invoices from the last seven months. We divided customers into three groups according to their profitability, not just the total purchase amount. We held four meetings with the sales team at ul. Sienkiewicza to understand the mechanisms of giving discounts. We also checked real transport costs to customers within a 22-kilometer radius of Pruszków.
The solution
We introduced a strict pricing sheet that blocks the possibility of granting a discount greater than 7.2% without the owner's consent. We established a new free delivery threshold at 1,540 PLN net. Each of the four sales reps received a new bonus system dependent on margin rather than turnover. Additionally, we implemented a simple conversation script that helps defend the price against demanding contractors.
Results
After 123 days of implementing the changes, the average net margin jumped by more than a third. The company now handles fewer orders, but significantly more money stays in its pocket.
Timeline
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March 2024Profitability analysis of 1,842 invoices and logistics costs
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April 2024Implementation of new discount tables and price locks
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May 2024Workshops on negotiation and margin defense for sales reps
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July 2024Results audit and establishing a plan for the next quarter
"We thought we had to be the cheapest in the area to survive. Mazowiecki Inkubator Rozwoju showed us that some customers were simply robbing us. Now we have less stress and a solid profit."