As the 4th quarter approaches and planning season happens, the importance of year-end profit numbers grows by the day. Many channel leaders have to see-saw from a meeting about this year to a Planning meeting for 2026 about every hour.
I found when I was in those meetings every day, that I needed to focus my energy into buckets, to do the best job possible for the year end closeout.
Year-End Profit Improvement – The Big Bucket that the little buckets pour into
For a B2B distributor in the industrial channel a huge part of your total EBITDA is from your backsides and rebates. Some years it’s 15% and other years 50% or more. As the year end approaches understanding what you can do to increase that total “Rebate” number is crucial this year and every.
There are so many year-end decision points you can make to increase that number- Where do you start your bucket process?
I’ll share my basic three “Little buckets” approach.
Dive deep into your Inventory Pipeline, Sales Pipeline and Backlog
What are the current and future demand run rates by Product Category and Customer? You need to be able to isolate that by manufacturer partner and at the individual SKU level when needed. This deep dive into Sales is crucial to get alignment and make good decisions.
For example: Let’s say as a distributor you project to finish at 102% of prior year sales with a strong confidence level. You’ve done all the work, sales have talked with key end customers, you have taken a deep dive into inventory/pipeline and more and you are confident that 102% is a solid number, but if you can get to 106% with this manufacturer you get an extra 100 bps (1%) in rebate back to dollar one. The above is a great example of where you might be able to make a smart forward inventory buy that is a win-win for both the distributor and manufacturer. Load up on some key AA inventory items and get a bigger check that the manufacturer is happy to write and you are happy to receive.
When I meet with many industrial manufacturers they are not always sure they get the return they wish from their rebate programs. I personally believe rebates drive more than just loyalty and partnership for manufacturers. If manufacturers view their returns as more a “gift” or “tax” on the business, then they may not be capitalizing effectively on their programs. I talk with many manufacturers weekly about “rebates’, and in some cases those programs are viewed more as “a cost of doing business”.
I can say from my direct experience working for many of North Americas largest distributors in a Category Management role, that the more open and honest manufacturer answers I get privately, are not always shared at the negotiating table with distributors.
Special Pricing Agreements – Customer Specific Price Agreements
Contract Prices that are tied to a specific end customer and manufacturer are crucial – Customer Specific Prices, Contract, Ship and Debits/Rebate prices or Special Pricing Agreements (SPAs) whatever you call them…are game changers for year-end profit numbers (they are game changers all year).
Sometimes SPAs can be a “Blessing” and other times they can be a “Curse”. What is difficult to manage is whether a SPA is blessing or curse can vary by market, and by individual customer.
When you have a great SPA system in place the “Blessings” are evident-
- It locks in a competitive price at the SKU by customer or customer type.
- It creates a “barrier to entry” for the competition as they may not be able to sell the same SKU at the level you are selling the SKU for a specific customer.
- It makes pricing easier by reducing end customer negotiation. The end customer is not as likely to ask for an additional discount on a price that you have already negotiated.
- It is more “guaranteed business”. If you have a SPA tied to a customer for a specific line that is negotiated that business is highly likely to stay with you.
When SPAs are viewed as being in the “Curse” Category-
- If your end customer has a SPA with a key supplier at the other distributor or a competitive supplier and you don’t have a similar SPA level it is hard to move that business. A customer SPA that is not tied to your business, can be a large barrier to entry with an end customer.
- SPAs are very hard to manage in terms of time, effort, and resources for both manufacturers and distributors. There is benefit to the complexity of SPAs, but the claim and administrative process is often immense to manage that process.
- If you are not as proficient managing your SPAs as the competition (Number of SPAs, customers on SPAs, competitive SPA price levels, etc.) your team may feel they are at a competitive disadvantage.
If you struggle to manage your SPA’s and are not as good as managing them as the competition, you are likely fighting with one hand. If this process is broken…FIX IT.
Annual Planning Sessions – Wow them with your data and information
One thing was clear from every conversation I have with channel partners is that Annual Planning Meetings and Quarterly Business Reviews (QBRs) ranges in effectiveness. The Planning Meetings range from ineffective “Social” Planning sessions, where little gets done other than platitudes about growing the business together, with very little done after the meeting…to “Strategic” Planning meetings where both sides actually partner together to grow the business together and take share.
The Common denominator and foundation of all Strategic Planning Meetings is next-level data and a true commitment to execute a joint business plan.
Here are some next level data ideas to bring to your Annual Planning meetings is you are not already
– Number of Active SPAs, customers on SPAs, % of business together on SPAs, and competitive SPA price level analysis. Sales Growth performance of customers on SPA’s versus the total business
– Must Have Account performance – however you cut this talk about results with the top 10% of customers who make up 80% of your sales. These are the customers that with joint business planning – Calls, Training, Relationship building programs, engineering and technical support that if you team up together will grow top line sales growth profitably.
– How many channels each customer buys from the distributor – Vending, Branch, Online, Stock Sales vs Direct Sales. Account assignment stats – Outside assigned accounts (80% of total business)…..the list of next level unique data that you can bring to a planning meeting is very big.
I personally have a list of over 80 different metrics I use with partners today that we choose from. There is no magic bullet of use these 20 metrics each and every time. Your unique business needs your unique metrics to be developed in a menu format for your manufacturer or distributor to use with the right partner at the right time.
For example- If you are a manufacturer who has great gap analysis tools to provide to distributors, but you are having a meeting with a distributor who has no ability to do anything with that data then use a metric that does work. P.S. if you have distributors who can’t act on gap analysis make sure you give preference to those distributors who can and will act on your gap analysis. Those proactive distributors will win more often IMO.
One thing is clear… those manufacturers and distributors who dive deep into their sales pipeline to maximize rebate dollars and rebate payouts, maximize their SPA programs , and come to annual planning with next level data are going to win more often at the expense of those competitors who do not.
What are your opinions on the future on Planning Season in 2026?
As always we appreciate your feedback. Please feel free to reach out to me at any time.
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