For private equity-backed IT distributors, the pressure is clear: grow revenue, but don’t let costs rise at the same pace. However, when volume increases, many distributors end up hiring new staff and adding to their headcount, contributing to a higher wage bill and therefore negating the increased revenue.
It’s a natural thought process to think that more sales and more customers mean you need to hire more staff. However, adding staff means more training, more costs, and a slower work rate (for new employees), as well as putting more work onto management.
It’s easy to get carried away and think that as a business you are doing well and growing. Because while you are increasing your revenue, and therefore, objectively you are performing successfully, you are not growing your margin, and that’s the KPI that feeds scalability and growth.
Instead, the most successful distributors focus on doing more with the teams they already have. This means removing friction and inefficiencies in workflows so that existing employees can handle greater volume without burnout or quality loss.
According to McKinsey’s analysis of top-performing distributors, the leaders in the field improved their SG&A (Selling, General & Administrative) efficiency by 1.4 percentage points and expanded gross margins by five percentage points above the industry average, without cutting staff.
How are they doing this?
They focused on operational leverage by streamlining work, automating repetitive tasks, and enabling their teams to focus on revenue-generating activities rather than administrative busywork.
This innovative action is what keeps the top-performing distributors at the top. They are staying ahead of the competition, investing in technology and enabling their staff to function to the best of their ability. This is the result of sound decision making, that hasn’t been afraid of advancements in technology, or, to look objectively at where the business needs to improve.
Distribution teams that are highly skilled often spend a surprising amount of time on time-consuming, low-value tasks such as:
These tasks are not just wasting your teams time and reducing productivity, but they increase the cost-to-serve ratio, slowing down the revenue cycle and making a good profit margin harder to achieve.
By removing these bottlenecks and automating routine processes, distributors free up their teams to focus on what truly drives growth:
Not only is this shift from transactional work to value-added activities a direct and measurable way to improve margins, but it also allows employees to thrive and do the irreplaceable human work of building real customer relationships, a crucial part of driving repeat business. This is the bit that we’re so passionate about at Answertree: AI that works with your teams, not instead of them.
Private equity investors look for more than just revenue growth; they focus on EBITDA growth and running operations. Distributors who don’t improve operational leverage risk static margins and falling behind their competition.
But those who strike the right balance build scalable businesses that are both profitable and sustainable. These kinds of businesses draw in investors, keep strong partnerships intact, and succeed in tough markets.
Finding ways to create operational leverage without hiring more people isn’t just necessary for business success but also for business survival. IT distributors can use better workflows, automation, and efficiency to boost margins and prepare for lasting growth.
Take a look at some of our videos explaining how HyperChannel® OS facilitates the perfect blend between automation, workflows and the human touch.
