Bonus Episode: Promotional Products Distributor Benchmarks: Two Types of Growth

Hi friends, I'm Bobby LeHew, Chief Content Officer at Commonsku. Occasionally we'll read an article from our blog that was popular with the community or a timely article based on current events. Since many of you are in the middle of 2024 business planning, today we thought we would share the first article in a two-part series on setting goals for growth, and it's specifically around creating the right benchmarks. So here's the article: Promotional Products Distributor Benchmarks Kevin Kelly is a radical futurist. He co-founded Wired magazine in 1993, and in 2021, over 2 million people watched his TED Talk, "The Future Will Be Shaped by Optimists." His forward-thinking optimism led to creative insight in The Matrix. His book was required reading for the cast, and he consulted for the movie Minority Report. His writing has appeared in every respectable publication in the world: New York Times, The Economist, Time, Harper's, Science, GQ, Wall Street Journal, and Esquire. So if there's anyone who knows, thinks, and dreams about future growth, it's Kevin Kelly. Kelly's futuristic street cred is why a recent comment from him made us rethink how we view growth in the promotional products industry. And it's really around two types of growth. Kelly stated in an interview with Noah Smith that we often conflate growth with two different meanings. Quote, the most immediate meaning is to increase in size. To add numbers, to get bigger. In short, growth means more. This is what Kelly calls Type 1 growth. But he stated, there's another equally valid and common use of the word growth, which means to develop, mature, to ripen, to evolve. Kelly said that this kind of growth is not about adding, but about betterment. Quote, it is what we might call developmental growth. In other words, Type 2 growth. It's about using the same ingredients in better ways. His example: Type 1 growth, which is like standard economic growth, aims to get consumers to drink more wine. Type 2 growth aims to get them to not drink more wine, but better wine. In our industry, distributors and suppliers also have two distinct types of growth, and both are a requisite for future-proofing a thriving business. And since Q4 is well underway, we wanted to share a few ideas from our numerous interviews with leaders on how to create benchmarks for both Type 1 and Type 2 growth. Let's start with Type 1 growth. First, aim for 20% year-over-year growth. While total average industry growth hovers around 5%, Cummins Q distributors average 20% in annual growth. And in PPAI's first ever ranking of the top 100 suppliers and distributors, The distributor median percentage revenue growth over a 3-year period was 17%. Now note, this was the median percentage for the industry's top 100 distributors as listed by PPAI. As a former distributor, I could never get a handle on growth expectations for my business. Most of my aspirations were wishes, not goals set with any reasonable exactitude. Knowing industry benchmarks like that of over 750 common SKU distributors helps you know which target to set your sights on. One of the most powerful ways to achieve annual growth goals is to reverse engineer your goals by backing into an overall growth target. How? By setting quarterly client growth goals. Quarterly benchmarks for client growth. Recently on the SkewCast, Stephen Musgrave, Vice President of GenuMark, one of the largest distributors in North America with over 100 employees, shared how to take an unwieldy annual sales goal aspiration and break it down into something practical and tactical that you can do each quarter to achieve your goals by setting quarterly client growth goals. Here's Stephen.

Now I'm pushing us towards a, a cycle where we have quarterly client growth plans that are stored right in the client profile in Commonsku. So we can have, like, if you're thinking about the 5-3-1 rule, the idea of the client growth plan is like This quarter we want to do this. It's like a mission statement for the quarter of where we want to see the relationship get. Status them as growth plans. And then I can just, you know, like they can be accountable to themselves and go work on those growth plans. And if they're really busy and finding a hard time being proactive, at any minute their boss might be like, let's take a look at your, how your growth plans are going. We're trying to set, I want to set them quarterly. Review them sporadically throughout the quarter and tie them into, to annual plans. I'm big at setting sales targets for clients, like numbers, but these are relationship plans that tie back to how to hit the numbers we want to hit and how those two things work together.

Setting quarterly growth targets by client forces you to think about each client like its own business unit. Doing so helps you start with potential, which is a rational way to unlock a target figure per client rather than an average annual target goal for all clients. And remember, goals are different than benchmarks. Goals are what you want to achieve. Benchmarks compare your performance against a company average or an industry average. And if you don't yet have a client benchmark, setting quarterly client goals will help you and your team determine an average benchmark for growth. So here's a pro tip. One way to create your own benchmarks for your company is to take your top 10 fastest-growing clients and create an average to compare against. For example, if your top 10 clients grew an average of 23% from 2022 to 2023, then you have a reasonable benchmark to set against your client growth goals for 2024. This brings us to one tiny little pro tip from another pro: benchmarking leading versus lagging indicators. Kirby Hossum might be known for his inspirational show Delivering Marketing Joy or or his 5 published books, including the recent Hit the Target. But for nearly 20 years, he's led a successful distributorship in Ohio with a passion for radical improvement. In a recent interview, we asked Kirby how he creates benchmarks for success, and he shared a pro tip that only a seasoned vet could come up with, which has to do with leading versus lagging measures.

Kirby said, so I think what one of the challenges is understanding what specifically to track. And so let me just talk about the difference between lead measures and lag measures. I think one of the things that people track all the time are the lag measures, right? That's the thing that has happened at the end. So in the promotional products industry, I want to sell $10,000 this week, and that's great. That is something that you should be tracking. But at the end of the week on Friday, you either did it or you didn't do it. You can't affect it at that moment. So that's one of the lag measures. Another one might be like invoicing, right? Like, how much did we invoice this week? How much did we sell this week? Those are great measures, But we like to focus a lot on lead measures. So lead measures are the things that you have complete control over.

Yeah.

That will lead you to the result you want. So in fitness, I want to lose 10 pounds, but the lead measure is I need to eat better and drink less and work out more. But you, like, I'm going to work out 30 minutes a day. I'm going to eat so many calories. Those are things you have complete control over that will lead you to the goal. So in the promotional products industry, we found that we looked for years to try and figure out exactly what those were. Is it the number of pieces of content that we post? Is it the number of calls? Is it the number of meetings? What we found about 3, 4 years ago is that the person in our company who sends the most presentations sells the most, right? Very, very specific through Common Skew to give that sort of shout out. And it was funny because in the meeting I discovered, I was like, who sent The second most. And they said, who sent the second most? I'm like, who had the second most sales? Same person it was. And I was like, okay, once we unpack that, but that needs the number of presentations we send out each week is an indicator, not necessarily of sales that week, but of future sales.

Now, maybe you already know this, but here's the kicker. Most distributors aren't measuring it. And if it isn't being measured, then no possible benchmark for success can exist except for a lagging measure like sales. One of the key reasons a lead measure like presentations creates a magic effect on future growth is that it is a predictive indicator of future sales and one of the few factors in B2B sales that you can control. Kirby continued with an example.

Our first 5 months, we were killing it. And then in June and July, we slowed down. And as I went back and looked at our numbers, our presentations fell down, our touches fell down while we were busy. Which makes sense. But had I like pulled on that lever earlier, maybe we would have pulled out of it faster. So keeping track of— that's why there's so much power.

That's a great point.

But during like July, I'm like, yeah, but what can we control? Yeah, what we can control is presentations and touches and, you know, reaching out to people. And so, you know, that it's— to me, it's not a surprise that August came back because we took control of those things we could control it in June and July.

So here's another pro tip from the community. Do you and your team have a benchmark for number of presentations? One way to create your own benchmark is to take your top 10 fastest growing clients from above, from the list we created before, and estimate how many presentations were sent as a percentage of sales growth. Next, let's talk about new logo growth. One of the most surprising benchmarks to emerge from the PPAI 100 list was the percentage of new client revenue or new logo growth. In all my years as a distributor, I've never known a benchmark to measure against new logo growth. I've assumed, wished, hoped, and made plenty of wild guesses as to what our new client growth should be, but I never had a reliable benchmark to measure against. Of the top 100 distributors ranked in PPAI's report, the average new client revenue growth was 20%. The median once you removed the outliers on the high end and the low end, was 18%. What was your new logo growth for 2023 and how does it compare to 2022? And now that you have a reasonable benchmark, what's your goal for new logo growth in 2024? To wrap up, let's talk again about Type 1 versus Type 2 growth. We recently had the experience of hosting two back-to-back CEO summits with Commonsku customers and leaders in our industry. We talked openly about the subjects related to growth in an intimate setting. During our candid and transparent talks, it was clear that scaling and growth were the two most pressing topics. Kelly's comments helped me understand that there is more depth to the idea of growth. Without Type 1 growth—adding more—you risk an inevitable decline in clients. Businesses merge, sell, or move on, and new business growth is a requisite for survival. But without Type 2 growth, you risk destabilizing your business. As important, without Type 2 growth, it's impossible to scale. If you enjoyed this article, if it was helpful to you, we encourage you to check out Part 2 on our community page at community.commonsq.com. Until next time, friends.