Kyle Uebelhor: Welcome back to the Alexander Group’s Manufacturing and Distribution practices annual podcast. This is our chance to say what we think is going to happen. And I tell you, Arshad, Andrew, 2024 went by in a blink of an eye. There was a lot that we thought a lot of it came to fruition. Some things, maybe not. But today we’ve got five fresh predictions. I think it’s hard to believe we’re a quarter of the way through the century. Let’s launch into what we see for 2025, for what’s happening with global manufacturing and distribution companies.
First off, I’m going to lead this off with tariffs, tariffs and protectionism. We know that it is getting a lot of headlines right now. In fact, our prediction for tariffs is that we will continue to hear a lot about tariffs. But more often we’re going to find there will be a significant lag or a lot less bite early on. In particular, we do think that there will be some potential offensive and defensive tariffs, regardless of what part of the world you live in, the likelihood of this actually coming to fruition, and it actually has an immediate impact in your 2025 planning is low. That being said, we think you should rip a page from your book, from the supply chain crunch from a couple years ago. Know your suppliers, know where they’re tied back to, where their origins are, understand where you’ve got agility. And for your sales team in particular, be good with your pricing strategy. Be ready to raise price when necessary to associate with the tariff offsets, but just know where you’re at. So that’s prediction number one. Andrew, I think you’re going to take us over to number two. What are you seeing?
Andrew Horvath: All right. Thanks, Kyle. So the second prediction is manufacturing and distribution focused with a heavy influence from private equity. So in the past, part of the private equity playbook has been to roll up companies in fragmented industries. Manufacturers, distributors have been through this in the past, but firms are setting their sights on another level in the value chain.
So recently private equity has scooped up a lot of HVAC installers, which are potentially very small companies in a very fragmented space. And these contractors or installers are part of the chain that, you know, buys from distributors or manufacturers directly. And all of a sudden, a lot of these HVAC installers have a lot more pricing power, and they are behaving more like key accounts. So what we see happening is a lot more of that. Installers and other middlemen rolled up, but also organizations like manufacturers, rep agencies. We’ve seen a lot of that group be rolled up by private equity as well. So what happens when this occurs in the market is that there’s a change in the coverage that organizations that sell into these installers and contractors have to dedicate. So it’s more coverage, like a key account versus the rest of the market account. More expensive, more people involved and have to get more return for that. There’s probably a change in pricing strategies so they act more like a buyers group oftentimes with more volume able to access better pricing. So pricing strategies are going to have to adapt as well.
And then the last item here is when these organizations tend to consolidate under private equity the go-to-market planning of those organizations has to change so they can no longer act like single shingle or single installer organizations. They now have to manage more sellers under that role-up. So a lot of the go-to-market practices are going to evolve for these acquired companies.
Kyle Uebelhor: Yeah, Andrew, we’re seeing a lot of private equity money on lock right now. And this is a great place that is starting to attract to. Are there any particular industries that you predict are going to have the more acute flavor of sort of this new model that you were describing?
Andrew Horvath: I think, you know, HVAC is probably going to continue quite a bit, but anything that’s akin to that, you think like industrial MRO more of that book and turn type business. Any industry that has that type of sales cycle or product breadth. I think you’re going to see more of it in those industries.
Kyle Uebelhor: You know, and that’s kind of think of an old school legacy sales model that actually leads quite well into Arshad, your major point that you’re thinking about in terms of a mega trend for what’s going to happen in 2025.
Arshad Carim: Yeah. Thanks, gentlemen. The third one is really around this idea of increasing professionalization of sales talent, as well as what we’re terming the compression, if you will, of field-based sellers. And this professionalization also goes across the sales model, which I’ll talk about here.
Sales headcount additions are going to receive a lot more scrutiny in our opinion, in 2025. What does that mean? That means commercial leaders are really going to have to find those seller productivity boosters and put them in place and make them work for them. This includes tools, training, enablement all the things that are going to help them hit growth goals with minimal new headcount. AI is going to start to start to have more impact. We see process improvement tools actually starting to give sellers some time back. That means they have more time to do more selling theoretically. And that should create more opportunities for growth.
We are also seeing what we’ve been calling for a few years now, the silver tsunami, highly tenured older age sellers, we’re seeing that pass and we’re seeing that trend waning in numbers, giving way to more structured sales models that will actually start to emphasize growth even more over volume and create more modern digital circular relationships with buyers in the buyer journey that they’re going through, however they’re engaging with you.
We also think specialists for key solution sets, are going to continue to be in the spotlight, that those will be targeted investments, but they’re still necessary in the model and may supplant some of that investment that we won’t see in the traditional field seller. And sales managers are really there’s going to be a reckoning for sales managers. There’s a reckoning coming for the sales manager who doesn’t manage, for the sales manager who isn’t embracing the tools, the KPIs, and the coaching and mentoring programs that their companies have put in place. So those need to be there because they’re going to be needing to manage to an elevated skill set and managing multi-generational sales forces at this point. And then I think commercial leaders are also going to double down on just tuning that commercial engine better.
Whether it’s for targeting customers, how they deploy those precious field resources for the best impact, and also modernizing the marketing function, really another key piece of this.
Kyle Uebelhor: You know, Arshad, that leads me right into my fourth item. You know, the fourth item on our list is the fact that we’re going to see the advent of some of proven AI technologies come into the marketing space. And I think we began and we had a middle and we had an end discussion about AI last year on this prediction podcast. It’s still there and it’s still very real. I will say though, some of the elixirs that were promised still feel a little bit like snake oil. They’re not quite coming to fruition.
That being said, we do know that the capability to use end-user insights and develop micro messages, messages that are dedicated and very focused on the type of end-user that you’ve got and starting to gather all this insight and data is real, and we’re seeing some really interesting case studies within AI on people who brought it forward to the front of the funnel, to the demand generation side of the house. And those end-user insights that are being garnered right now are helping to create sales plays for your sales team. But I’d say AI is still real we’re going to still see it come into play. I’d say if you’re going to dedicate a little time and effort, put it up front, put it in the marketing time. That’s where your dollars are best spent right now. And that’s where we see that sort of forecast moving forward. All right Andrew, why don’t you bring us home? We got one more. What do you think?
Andrew Horvath: Sure, Kyle. So this is an interesting connection point here between the BI tools that a lot of sales and marketing teams are using and sales management. So for the longest time, especially in the world of manufacturing and distribution, sales management has been a lot of art and some science. So a lot of ex-super sellers, leading teams, a lot of gut feel, and we’re generalizing a little bit, but it’s probably more so in this industry than others. But what you’re seeing now is the investment in business intelligence tools like power BI and the like are revealing a lot more data to managers. And the question becomes, how do those managers use the right metrics and data to measure their teams, provide updates and reporting for those teams, and drive those teams to better outcomes?
Three things really have to happen to really harness the BI tools. The data has to be good, right? Just like in your AI example you know, garbage in, garbage out for these types of tools. So making sure the data entry is good and the data is cleansed. We have to also make sure that we’re prioritizing the correct metrics. So you can get overwhelmed with all the metrics, especially on a point-of-sale level data collection when you have every single data point from every order in a seller’s history, that can get overwhelming quickly. So figuring out what those metrics are that make sense. And then also making sure that sellers have the availability of this data so it can just be locked in a black box. It can’t be a tool that can just be read by the managers. It has to be accessible to the sellers as well. So assuming those three things are in place, we think that the BI tools are going to do is really it’ll change the role of the manager to be a lot more science than art, but it’s also going to reveal who is a good manager and who probably should not be in that role.
So you know, the excuse of, well, I don’t know where to look for the data. I don’t understand the data. Data doesn’t matter. It’s more of a coaching thing. That’s going to go away pretty quickly for sales leaders that know their stuff. And you’re going to have a group of managers that may not be managers today. They might be sellers today, or sales ops people or something else that move into that role that can really harness the data and use it to create much better outcomes for the organization. So it’s a bit of, you know, pulling the wool back on some of the excuses we’ve heard year in, year out about why it’s tough to manage salespeople. It still is. But these tools, especially because of the investment behind them, ought to provide some more visibility and transparency to that whole muscle.
Kyle Uebelhor: I love it, Andrew. We’ve always said that the frontline sales manager is the most important job in the entire organization. And now we’re saying let’s get smart and get more prescriptive, more science, a little less art. That’s exactly right.
Arshad Carim: Like I said, the reckoning is coming.
Kyle Uebelhor: Well, there you have it, folks. That’s our five major predictions. Tariffs. A little bit less bite. Still, the bark will be there. We’re going to see the PE roll up hit a lot of industries at lower levels than you’ve ever anticipated. So do anticipate seeing and interacting with appropriate adjustments to your sales model based off a renewed power from private equity through some of your channels. The professionalization of the sales team, it’s here and now. It’s past the idea of we’ve got to garner the information from that silver tsunami. Now it’s time for that next generation of seller. But realize there will be scrutiny on where you spend your headcount, because some of these new roles are more costly. As I said, hey, AI is real, but bring it up front. It’s real, in the marketing organization right now, it’s where some of your best outcomes are coming from. And then as Andrew mentioned, we’re going to see that front-line sales manager become stronger and better equipped with good BI tools.
With that, we’re always happy to have you learn from us. Reach out anytime. We’re more than happy to share these insights in greater depth, or talk about some of the issues you might have individually.
