How to MinimizeRevenue Leakage

insights from

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Start by understanding the subtleelements contributing to the problem.

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List Price: the price of a product advertised to buyers

Invoice Price: the amount reflected on the invoice. This will include any on-invoice discounts and allowances.

Net Price: the price including any hidden discounts not on the invoice, such as warranties, terms, bonuses, and other off-invoice discounts.

Pocket Margin: the net price minus all related transaction and service costs. This can include cost of goods sold, freight costs, special delivery costs, and other extra costs associated with closing a deal.

Lingo to Know

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Pocket Margin Waterfall Analysis: the evaluation of the difference between the list price and the final pocket margin.

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Take a detailed look at this much further down than just

theproduct and customer level.

Get down to the transaction level.

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Locate major differences between list price andpocket margin using profit waterfall analysis.

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When you find these major differences, acton them to reduce negative impacts on margin.

Here’s how.

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1. Get Everyone Involved and on the

Same Page

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Align data from marketing, sales, and finance teams to identify negative and

low-margin transactions.

Define metrics collaboratively, andpull all information into one system.

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2. Define and Prioritize Customers

and Products

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Prioritize customers and productsby levels of profitability.

Define and label them to allow all stakeholders understand how each affects

margin.

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3. Sweat the Small Stuff

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Margin leakage often starts with small customer accounts and lower volume

product lines.

Over time, revenue leakage can add up to quite a bit of lost profit.

Watch those small accounts!

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4. Label Deviationsfrom List Price

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Conduct an audit of all discounts, allowances, and rebates

to see how each affects price differently.

Which are successful at closing big deals?

Which are slowly leaking margin over time?

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5. Define a Prioritized Path Forward

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Motivate stakeholders to agree on: 1. Price targets for top products and

customers2. Caps on discounts 3. Data audits

Focus on the areas of greatest opportunity with the least risk first.

Emphasize value over commodity costs.

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Your Next Step:

Reduce Revenue Leakage Without Inciting Customer Rebellion

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1. Motivate Your Sales Team Appropriately

Incentivize your sales team to specificallysell on your pocket margin goals.

This may take some experimentingwith your incentive programs.

Give your sales reps multiple paths to success.

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2. Take the Path of Least Resistance First

Start with your prioritized list.

Which customers will pay for value?Which will be more resistant?

Identify customers who you could entice to increase volume at higher pocket prices.

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3. Sell Value, Not Price

The most effective way to convince customers to pay a higher price is to sell

on value.

Sales reps should quantify the impact of 1. Fast customer service2. On-time delivery, and 3. High-quality products

NOT on the lowest price.

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Running a profit waterfallshouldn’t take months.

We help customers build custom waterfalls from scratch quickly and

efficiently.

Uncover Your Revenue Leakage Sources

Click here to see how KiniMetrix

can do this for you.