SMART CPA®: Customer Profitability Analysis

Let’s think about customer profitability as a "three-legged stool." It’s a balance between margin, order size, and cost to serve. When working with our clients on CPA, we take into account every expense including sales cost, freight in, handling, delivery, storage, inventory carrying cost, cost of getting paid, etc. We then apply all income and expenses to different order types such as warehouse, direct, will call, counter sale, internet, service, etc., and then match each customer to their specific order history to determine each customer’s operating profit contribution.

Having worked with many distributors over the past ten years has provided us with a unique perspective and the ability to diagnose the root causes of the profit leaks uncovered from CPA. We provide our clients with actionable solutions, training, and measurement tools, key ingredients for improving bottom-line profits.

As no two distributors are alike, our methodology calls for a custom approach for every CPA project. We calculate the operating profit contribution down to the individual customer. If a customer’s operating profit is below acceptable levels for your company, we will provide specific recommendations for improving profitability.