Line Profitability Analysis

by Jerry Leth, Vice-President and General Manager, MANA

About 10 years ago, MANA led a dozen manufacturers’ representative members on a trade delegation to the Hannover Fair in Germany. The night before the fair opened, we hosted a dinner for the delegation so they could get to know each other. We asked each to get up and say something about themselves and their manufacturers’ representative business.

One told us he needed to find several replacement lines, that’s why he came. He went on to say he participated in the Manufacturers’ Representatives’ Educational Research Foundation’s (MRERF) Certified Representatives’ Professional Manufacturers’ Representative (CPMR) program. One course taught him how to perform line profitability analysis. He analyzed all his lines, learned several were unprofitable and decided to terminate the agreements with those principals. He really liked one of these lines.

I remember that this news shocked me a bit. Manufacturers’ representatives actually terminate agreements with principals? I thought it only went the other way!

How many manufacturers’ representatives perform profitability analyses on their lines? We recommend you annually perform a profitability analysis of all your lines. In today’s environment, change occurs at an ever increasing rate. A previously profitable line becomes unprofitable, not necessarily because the company changes in a negative way, but because the markets change.

Most find it difficult to break off a relationship with friends and people they like, and we understand that. However, your business comes first. Your survival and growth depend on you representing profitable lines. We face difficult choices in life and when we decide to make changes, it takes time for you to evaluate and appreciate the results.

A year later I contacted the member and asked how it worked out. He told me he had been able to find quality replacement lines and that his profitability had increased significantly. A lesson well learned.

Jerry Leth, MANA’s vice-president and general manager, started as membership manager in August 2000. Previously, Jerry owned and operated Letco Tech Sales, Inc., a MANA member, multi-line professional outsourced sales agency he founded in 1989. Before starting his own agency, he managed a network of manufacturers’ reps as vice-president of sales and marketing for torque and tension equipment. Jerry graduated from Stanford with a mechanical engineering degree. He started his career at Hills Brothers Coffee in San Francisco in engineering and production before embarking on a sales career.