The State of Growth 2024 | Must Read TABLE 5: Revenue From Top Three Clients PPAI 100 Distributors 21% Distributors $100M+ 9% Distributors $50M-$100M 23% Distributors $25M-$50M 18% Distributors $5M-$25M 29% Distributors $1M-$5M 40% Distributors Under $1M 39% While all segments have been generating a healthy amount of revenue from new clients as noted above, smaller companies are more reliant on their top clients than the industry’s largest companies. This is a potential example of an imbalance in the industry, as such a high percentage (79%) for companies generating $5 million and under in revenue puts those companies at greater risk of being affected by outside circumstances. While it suggests that companies in those segments form strong relationships with their clients, it could create difficulties if any of those top clients are impacted by future economic conditions. TABLE 6: Revenue From Top 10% Of Sales Reps PPAI 100 Distributors 30% Distributors $100M+ 33% Distributors $50M-$100M 16% Distributors $25M-$50M 34% Distributors $5M-$25M 33% Distributors $1M-$5M 49% Distributors Under $1M 83% As you will see below, distributors under $1 million in revenue are averaging only one full-time sales rep. With a smaller pool of reps to draw from, it stands to reason that the top performers – often the owner-operator – would account for most sales. “I was surprised that these percentages were not higher given that the average growth of industry-wide revenue is significantly higher,” he says. It’s important to note, however, that the average growth numbers are measured over a three-year period whereas the new client percentages are measured over 2023, which was a slower growth year for the industry. According to Titus, new clients were a big part of business for Fully Promoted last year. “We have been seeing new client growth and those new clients placing larger orders with us,” Titus says. “We believe this is because of our differentiators as a franchise system where our local owner-operators are very hands-on in their business and can provide a high-touch customer experience that many of our clients seek us out for.” As a whole, the industry grew 2.24% in 2023, according to PPAI’s Sales Volume Estimate. TABLE 4: Average Order Size PPAI 100 Distributors 2,055 Distributors $100M+ 1,907 Distributors $50M-$100M 2,556 Distributors $25M-$50M 2,007 Distributors $5M-$25M 1,776 Distributors $1M-$5M 1,677 Distributors Under $1M 1,170 “As a midsized distributorship and relative to these benchmarks, our diversified client base that we have segmented by size has resulted in better margins and less concentration of revenue than many of our peers,” says Phil Yawman, president of New York-based distributor Cooley Group, this year’s No. 72 distributor. “The data clearly speaks to the inherent value of client retention and increasing the average order size,” he adds. “These two statistics are the hallmarks of distributors who create great customer experience by delivering bundled solutions and not just products, and those which develop long-lasting partnerships with their clients.” Phil Yawman PPAI • JULY 2024 • 47
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