Alvarez and Marsal

Publish Date

Sep 27, 2021

Show Me the Money, But the Right Money Please!

Clifford Hall, Managing Director

Service / Industry: Commercial Excellence

In our three-part series, “Show Me the Money, But the Right Money Please!” A&M Private Equity Performance Improvement Managing Director, Cliff Hall, and Senior Directors, Sicco Tans and Troy Temple discuss the framework behind an effective commercial strategy that drives profitable sales, margin improvement, and cash flow.

Given the complexity of the current global economy—markets and customers in turmoil, shifting business models, and cash strapped vendors and customers—it is time to reset to drive profitable sales and commercial performance, integrated with operations to reduce costs and improve working capital.

Companies need to understand where they are making money and be strategic around how and where they go to market. This forms the basis for a holistic approach to identify and apply the levers to create value and transform the commercial function to deploy it cost effectively.

A&M Commercial Excellence Approach

Commercial Excellence Approach

In part I, “Where is the Money?” we discuss how understanding cost-to-serve and creating transparency on margins and the market are the foundation. This informs product and pricing strategy, and sales organization structure and process to create an effective commercial strategy that drives profitable sales and cash flow.

Market Transparency develops an understanding of the market and where it is heading, separating one-time market events or poor execution from structural changes underlying trends. Ultimately, the goal is to understand how your customers are making buying decisions to inform your go-to-market approach.

Margin Transparency provides visibility to where you are and are not making money. The key is to robustly understand the true cost you are incurring to serve each customer and improve financial transparency by market, product line, SKU, customer, channel, and plant or location.

Based on this transparency, Product Portfolio Optimization ensures that you are selling the right products. Often, Margin Transparency will reveal a long tail of low volume, low margin products with an opportunity for tactical product rationalization through pricing actions and shifting customers to alternate products, driving complexity reduction.

Pricing and Margin Recovery leverages our knowledge of the market and margins to ensure we are not leaving margin dollars on the table and gain compensation for costs to serve that provide value to the customer.

In Part II of our three-part series, “What is my Sales Force Doing?” we examine how the sales force is sized, structured, and deployed to uncover and capture profitable growth opportunities.

Sales Force and Market Coverage optimally deploys your sales force to serve its markets with territories designed to maximize client engagement over travel time and skillsets aligned to hunting and farming roles. Also critical is delayering sales management to maximize productive selling resources.

Segmentation and Channel Optimization aligns accounts to the right sales resources, maximizing cost-effectiveness. With 80% of sales coming from the top 20% of accounts, are the right sales resources assigned to them and can we more cost-effectively serve the tail with an inside-sales or indirect model.

In Part III of our three-part series, “What Are My Sales Managers Doing to Move the Needle?”, we look at the sales management function within the organization and the importance of aligning incentives, systems, tools, and sales leadership to drive accountability and profitable growth.

Sales Process and Operations drives accountability for the Sales team. Driving productivity through a well-designed management system ensures selling staff are doing the right things to drive sales. Unproductive non-selling time should be identified and eliminated by redesigning processes, job roles, and structure and building effective support functions. Commercial and Operations functions must also collaborate to drive operational efficiencies and ensure service levels to customers.

Linking Pay to Performance with carefully designed incentives ensures that commission plans and quotas are aligned to corporate goals and are driving desired selling behaviors. An improved understanding of Margin helps inform this design so these incentives drive profitable growth.

Change Management and breaking bad habits requires sales leadership willing to make tough decisions. Past success can make a company resistant to changes in the commercial function. It is company leadership’s job to bring a fresh and unbiased set of eyes, and to use and trust objective analysis to help make difficult decisions.

We have found that the Commercial Excellence levers described here are broadly applicable across multiple industry types including business to business, business services, and consumer and retail as well as to varied business situations including diligence, performance improvement, merger integration, and carve-out.

DOWNLOAD THE SUMMARY ARTICLE HERE


Show Me the Money, But the Right Money Series

CLICK HERE TO READ PART 1: Where is the Money?

CLICK HERE TO READ PART 2: What is My Sales Force Doing?

CLICK HERE TO READ PART 3: What are My Sales Managers Doing to Move the Needle?

Clifford Hall

Clifford Hall is a Managing Director with Alvarez & Marsal’s Private Equity Performance Improvement Group in New York. He also leads the Commercial Excellence service line in the U.S. Mr. Hall brings more than 25 years of experience in a range of management, board advisory, operational, and functional roles in the Americas, Europe and Asia. As a mentor, he has successfully coached board of directors, portfolio company management professionals and their teams to measurably impact financial performance.