Click to read the original text for details. What is business for? To make money. What makes a business fail? Not making money. Why not make money? There are ten thousand reasons— For distributors not making money, we can look at it from two levels: one is operational reasons, and the other is managerial reasons. What are the operational reasons for not making money? For example:
Industry-wide market shrinkage;
Major product accidents;
The chosen products are not suitable for the local market;
Low market coverage, few effective terminals;
Product concepts too new, consumer cultivation cycle too long;
Small distribution profit margins;
Competitors too strong;
Major changes at the manufacturer, such as personnel changes or channel structure changes, affecting the distributor. What are managerial reasons for not making money? For example:
Improper selection and employment of personnel, leading to high labor costs and low output; some employees don't even earn their own wages;
Poor service quality to customers by sales staff, low customer satisfaction, resulting in fewer orders and poor displays;
Lack of proactive and systematic customer relationship building, no value-added services, distant relationships with downstream customers, and only money talks when issues arise;
Lack of understanding and learning about modern retail or new business formats, and no effective response mechanisms, leading to poor cooperation results, high costs, and long payment cycles;
High employee turnover, poor handover in market transitions, leaving a pile of historical problems, and even customer loss due to inadequate handover;
Single-level contact with upstream manufacturers, lack of high-level relationships, untimely understanding of manufacturer changes, and inadequate resource acquisition;
Incomplete management systems, inadequate supervision, many loopholes exploited by some malicious employees, leading to corruption and embezzlement;
Lack of organizational structure, unreasonable department setup, lack of job descriptions, incomplete standards and processes, chaotic work scope, or responsibility blind spots, leading to mutual buck-passing among employees;
Besides the boss, no one is responsible for costs, and there are no corresponding cost supervision and improvement measures, resulting in many internal cost loss points, each wasting costs every day. Structurally, a company's operations consist of two parts: management and operations. Operations are mainly external, involving market, products, customers, performance, and gross profit, while management is internal, mainly involving management, standards, cost control, and personnel. Logically, in the early stages of a company, operations drive management, but after the business scales up, management drives operations. From a profit contribution perspective, operations create performance and gross profit, while management determines costs and net profit. In business, what is seen externally is performance and gross profit, but what the boss ultimately wants is net profit. Distributors find it hard to make money; more often, they lose money on management. At the operational level, veteran distributors have been in the game for years. They may not know the national market conditions, but they understand the local market thoroughly and can accurately predict trends. They have strong judgment when introducing products, and calculating distribution profit margins is a piece of cake. As for market coverage, it largely depends on the distributor's own control over costs and risks. It's not surprising for distributors to sell goods even a thousand kilometers away. They have experienced various product accidents, industry incidents, regulatory oversight, and manufacturer changes, and have long developed the ability to adapt. In fact, at the operational level, distributors can even guide manufacturers. However, when it comes to management, distributors are at a loss.
. Some distributors don't separate operations from management, thinking they are the same. For example, when promoting a sales supervisor, they only look at sales ability, believing that sales ability naturally implies management ability and the ability to lead a sales team; 2. Some distributors think management is just about setting rules and assessments, so they create a bunch of them, but they are useless, and then they say these things don't work; 3. Most distributors come from individual businesses and have never worked in formal enterprises or institutions, so they have no direct exposure to management systems and are ignorant of them. This is why distributors who start businesses from enterprises (manufacturers, sugar and alcohol companies, supply and marketing cooperatives, department stores, etc.) have a much higher success rate; 4. Although distributors come from grassroots backgrounds, they start as bosses from the beginning, managing others from the start. They have never been managed by others, so they only know what it's like to manage others, never what it's like to be managed, making it hard for them to empathize with their subordinates' management feelings; 5. Early distributor business structures are simple, mainly family members, relying on trust and self-discipline, so management is not needed. The need for management usually arises when the number of employees increases, especially when the number of externally recruited employees grows; 6. Distributors' operations are short-term, focusing on quick wins (even cross-region selling is a quick win), immediate investment, immediate results, and if the path is wrong, they retreat immediately. Management, however, is long-term, involving building and nurturing, requiring long cycles for personnel training, and even system building requires repeated revisions. Moreover, current investments have no immediate returns, which is hard for most distributors to accept. In summary, operations focus on products and performance, while management focuses more on people. Building rules and regulations is for people, and training is for people, because people's efficiency and attitude determine sales performance, the quality of customer cooperation, and the company's operational efficiency and costs. If people problems are not solved, they will lead to high operational costs (losses) that directly eat into the profits from operations. In the long run, the company will lack momentum for sustainable development, and its scale and quality will be hard to improve. In terms of management and operations, distributors are the opposite of state-owned enterprises. State-owned enterprises have very good management: wages, benefits, promotions, honors, after-work life, and even employees' family issues are covered, but they lack the initiative and keenness of distributors in operations. From an operational perspective, distributors are successful. They even make products without brands, without manufacturer support, and even mediocre products thrive locally. In China, almost all manufacturers' success is supported by distributors. However, in management, distributors are generally backward. This backwardness is due to historical reasons and also the distributor boss's own vision and understanding. Objectively speaking, distributors are not not making money; rather, the money earned through operations is mostly lost to poor management. But even now, many distributors still insist on finding reasons at the market operational level, rather than looking for reasons and methods at the management level. Moreover, many market-level reasons are beyond the distributor's control. Even if they find them, what can they do? They can only sigh. If they don't make up for the internal management course, they may not even have the chance to complain in the future. This article is by Pan Wenfu. Born as a private business owner, he managed a family distribution company for many years, during which he also served as a business manager and trainer in several production enterprises. His research focuses on internal management of small and medium-sized private enterprises, with main topics including personnel management, cost control, management backend construction, and the integration of retired military personnel into private enterprises. He continuously breaks down over 400 topics related to internal management of private enterprises and keeps updating materials and solutions. -END-