Margin ArchitectureSynthetic worked example — not client data
Worked Example · Wholesale DistributionThe biggest customers were the best customers — until the costs found them.
A $54M specialty food and beverage distributor ranks its customer book by revenue and prices deals off invoice margin — price minus product cost. Freight, handling, returns, and $890k of rebates tracked in spreadsheets all sit below the customer line, attributed to nobody. This example models the top-20 book: $23.4M of revenue.
Educational example with an invented company and figures. The visuals demonstrate reporting logic; they do not represent clients, results or realized savings.
Gross margin by customer.
Invoice margin says the book sits in a comfortable band, with the large chains a little lower — “volume pricing, that’s normal.” Switch the view to see what happens when freight, handling, returns, and rebates are attributed to the customers that cause them.
Revenue rank was being treated as value rank. The three national chains plus CornerFresh — 45% of the book’s revenue — contribute negative true margin. The six independents, 13% of revenue, generate close to half of all real margin in the book.
The change, customer by customer.
Ordered by how far invoice margin sat from the truth. Shaded rows fall below the level at which a customer covers its share of operating overhead.
Where the margin went.
Four cost pools sat below the customer line. Nothing was hidden — it was simply never assigned to anyone.
The rebate blind spot. $890k of rebates and promotional allowances lived in spreadsheets and hit the ledger quarterly, in arrears, at company level. One chain’s renewal had been priced the previous year off margins that excluded $410k of that chain’s own allowances.
Size is not profitability.
Revenue on the horizontal, true margin on the vertical. The largest accounts in the book sit at or below zero, while the smallest sit highest. UrbanGrocer’s 26 small-format stores take 2,760 tiny drops a year; CornerFresh averages under $1k per drop.
Maintain the logic with the report.
Relevant definitions and checks become part of the agreed model and monthly cycle. This example shows the financial depth available within the reporting service.
Allocations, margin definitions and assumptions must be adapted and validated for each business. A reporting correction is not, by itself, a saving or a pricing recommendation.
Tell us what you need to report each month.
We start with your current reports, available sources, and the calendar your team needs. Setup and the monthly service are scoped in writing.