FEATURE ARTICLE: Line Profitability Analysis - January 2025

With the competitive nature of our industry and the expectations rep firms face, a deep understanding of your business is a must. We have various commitments and obligations to our channel partners, both in the form of time and financial investments in our businesses. From sales calls to product demonstrations to factory trainings, managing time is a balancing act all rep firms face. Financially, firms are investing in facilities, test kitchens, and new personnel to stay competitive. Running efficiently and effectively is as important as ever.

Line profitability analysis can be a valuable tool in evaluating your business and helping guide future decisions. With the right dataset, it can also assist in evaluating new potential manufacturer relationships. What lines are truly driving your profit? Is employee time being spent effectively? Is a line “high pain” for its relative income? These are some of the questions a line profitability analysis can help address. Let’s take a closer look at some of the factors involved.

• Time: The scarcest resource we have. Is the time invested relative to the income received? Is an inordinate amount of employee time spent on a line that does not reflect income? An employee assessment of the percentage of their time spent per line compared to an income-by-line breakdown of your business could be used to evaluate if time is being used effectively.
  
  
• Cost: What are the associated costs in the line? From test kitchen or showroom equipment to travel expenses and personnel time invested in sales calls, quotations, or reporting—what is the true cost of representing the line?
  
  
• Income: What is the sales volume of the line? What is the commission rate? Is this volume on the incline or decline?
  
  
• Other Factors: Are there synergies with other brands you represent? How does it fit into your overall product portfolio? What is your customer base’s perception of the line? How does that perception affect your overall business? While less quantifiable, these are important questions to reflect on.