How to Make Money
Warren Buffett once said that there are only two rules in business:
- Rule No. 1: Never lose money.
- Rule No. 2: Never forget Rule No. 1.
The Official Guide to Wholesaler-Distributor Financial Success is a new 3-volume set of books by Brent Grover of Evergreen Consulting. It is published by the NAW Institute for Distribution Excellence. (The NAW Institute also publishes Facing the Forces of Change®: Lead the Way in the Supply Chain.)
These ambitious books represent the first and most complete attempt to distill the best practices of wholesale distribution management into one compact package. In my opinion, they are a truly outstanding resource for anyone who runs a wholesale distribution company. As I discuss below, this series would also be an amazing tool for any CEO who wants to develop the next generation of leaders for his or her business.
THE STRAIGHT DOPE
Volume 1 (Exploring the Financial Fundamentals of Distribution) is my own personal favorite of the group. The topic may not sound glamorous, but understanding the content of this volume is the only way to master Mr. Buffett’s Two Rules. As you all (hopefully) know, any wholesale or retail company should measure its true profitability using Return on Investment (Pretax Profit / Owner’s Equity). Brent provides one of the most readable, concise discussions of true profit in a distribution company that I have ever read.
To be frank, I’ve personally met too many distribution business owners who are overly focused on income statement items – revenues, gross profit, or operating profit. I once worked with the owner of a $100 million wholesaler-distributor who seemed proud of the fact that he couldn’t read a balance sheet. Maybe he read the Unofficial Guide to Success?
Volume 2 (Distributor Manager's Guide to Departmental and Branch Financial Excellence) covers a lot of ground in a short amount of time, ranging from sales management to credit issues to purchasing effectiveness. It’s a solid overview for anyone moving into a branch or division management, although each chapter deserves its own book.
Volume 3 (Distributor Executive's Guide to the Art of Top-Quartile Financial Performance) is an integrative look at how top management can bring together all of the disciplines for long-term management. I found the chapter on benchmarking metrics to be the most useful and practical. Brent emphasizes the fact that benchmarking should be against other companies, not just against your own company’s past performance. I also liked the many suggestions for how to begin this process in yoru own company.
These books are very readable, despite the subject matter. Rather than a straightforward text, the books are interspersed with first-person accounts from the employees of a fictional wholesaler-distributor. For example, “Susan, Vice President and General Manager” has a friendly, chatty introduction to Operating Profit. I enjoyed this stylee because it makes the books very accessible for the non-specialist. Nonetheless, I would also appreciate a future companion reference book that boils down the essential financial content and ratios for quick reference. (Yes, that’s a request for Volume 4, Brent!)
In the spirit of full disclosure, Brent and I both serve as Fellows of the NAW Institute and are both on the Advisory Board of Supply Chain Equity Partners. Nonetheless, I am giving you the straight dope on these books. They are well worth your investment.
BUILDING FUTURE LEADERS
In Building Future Leaders, I describe how George Pattee, CEO of Parksite Group, used my Facing the Forces of Change®: Lead the Way in the Supply Chain book as a management development tool for building the next set of leaders in his business.
I encourage wholesale distribution CEOs or Presidents to use Brent’s books in a similar fashion. Form a virtual book club for all senior executives and managers in your company. Go through these books one chapter per week and schedule weekly conference calls to discuss how your company really operates and makes money. In 16 weeks (chapters), I guarantee that you’ll gain unique insight in your own company and the capabilities of your next generation of leaders
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I’ll be at the NAW Executive Summit in DC this week. If you’ll be there, please let me know what you think about this blog – good, bad, whatever.
1 comments:
Thank you for taking the time to read and review the Official Guide.
I agree with the bromide that “having written a book is better than writing one”. Even though this project was a labor of love, it was really hard work.
A review such as yours, especially coming from you, is very satisfying and especially so knowing that companies and managers will benefit from the material.
Brent Grover
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