InTents August/September 2023 - 39

Margins as metrics
Once the gross margin mentality has
begun to seep into the daily lexicon of
your employees, you can cement the
transformation by using it to measure
performance. The first one that comes
to mind is the gross margin dollars per
head measurement. Once a manager
has established a goal, staffing decisions
become easier. The same regional
manager mentioned earlier had a
benchmark of $10,500 gross margin
dollars per head on a monthly basis. If
the gross margin dollars began to trend
up, and the per head figure was rising
significantly, he knew that it was time to
add a body. If the gross margin dollars
were diminishing, he knew when it was
time to make cuts.
I am a huge advocate of gross margin return
on inventory investment or GMROII.
This metric tells us how many gross margin
dollars we expect to earn for every dollar
invested in inventory. By understanding
where we achieve the highest returns,
we can alter our sales direction. We can
also use this information to identify lines
where changes in pricing and replenishment
should occur. Since gross margin
dollars drive the operation, it is in our best
interest to drive the highest return.
Adopting a gross margin state of mind is
not an overnight task. It will take months
of education and reform. Old habits die
hard, and you will find yourself falling
back on the top-line sales verbiage. Catch
yourself and keep driving to change your
own mentality. Open dialogue with your
team, setting short-term profit goals and
establishing margin-based performance
standards will help you make the shift.
Just remember-sales are for show, gross
margins are for dough. Good luck and I am
always here to help.
Jason Bader is the principal of The Distribution
Team. He is a holistic distribution advisor who
is passionate about helping business owners
solve challenges, generate wealth and achieve
personal goals. He can be found speaking at
several industry events throughout the year,
providing executive coaching services to private
clients and letting his thoughts be known in an
industry publication or two. He recently launched
his first podcast, Distribution Talk. Episodes
and additional resources can be found at
distributiontalk.com. He can be reached at +1 503
282 2333 or email at jason@distributionteam.com.
InTentsMag.com 39
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InTents August/September 2023

Table of Contents for the Digital Edition of InTents August/September 2023

InTents August/September 2023 - Cover1
InTents August/September 2023 - Cover2
InTents August/September 2023 - 1
InTents August/September 2023 - 2
InTents August/September 2023 - 3
InTents August/September 2023 - 4
InTents August/September 2023 - 5
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InTents August/September 2023 - Cover3
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