Would you like some fries with…
By CFO on-Call Partner Arthur Bortz
Three years ago, a client of mine with a turnover of $10 million was going through a difficult time, not only with sales flatlining but also with margins being squeezed by competitors. Making matters worse, their major supplier — who provided approximately 70% of their products — reduced back-end rebates from 4% to 2%, resulting in a loss of about $140,000 of gross profit. The average margin on this supplier’s products was only about 10% before the supplier rebate, while other products such as accessories generally achieved margins of around 30%.
To alleviate this situation, we introduced an incentive program for the sales team by setting attach-rate targets for high-margin items such as accessories, software, and extended warranties. This encouraged staff to bundle additional products with each primary sale — for example, offering extended warranties with computers, backup drives, or protective cases with laptops. These items typically carried margins of around 30%, higher than the core product line.
To support this initiative, we implemented targeted staff training to enhance the sales team’s ability to identify customer needs and confidently recommend suitable high-margin accessories and extended services. The training focused on consultative selling techniques, value-based conversations, and practical product knowledge — equipping the team to position add-ons not as optional extras, but as essential enhancements that protected and improved the customer’s purchase. This lifted both capability and confidence, resulting in stronger conversion rates and more consistent attach performance across the team.
Another positive outcome was an improvement in team morale. Over the next three years, add-on sales increased by $300,000 in Year 1 and a further $100,000 in each of Years 2 and 3, demonstrating sustained adoption of the strategy and ongoing profitability improvements.
The effect of this approach was significant and the numbers bear it out. Before the supplier rebate cut the company’s gross margin was 16.0% (pre-rebate position). After the $140,000 rebate hit, the baseline gross profit fell to $1,460,000 (a 14.6% margin on $10M).
Beyond the direct financial gains, the initiative stabilised cashflow, strengthened the company’s financial foundation, and improved team morale and selling capability — creating a platform for continued growth.
