When it comes to finding new business, nobody is “just looking.”

Prospecting. Canvassing. Exploring. There are a number of phrases for it. For distributors, the new business radar is always on.

If there is a proven method for successfully finding new, profitable sources of business, nobody is giving the answer away. But there are some approaches and concepts distributors might want to consider.

Two distributors—Hub Industrial Supply and Dillon Supply—recently applied some new ideas and approaches to gain new business.

Dillon, a MRO distributor based in Raleigh, N.C., ranked 40th in INDUSTRIAL DISTRIBUTION's Big 50 this year with 2006 sales of $144 million, employs more than 360 people at 25 locations.

Hub Industrial Supply has 29 employees at its Lake City, Fla., headquarters and carries products such as fasteners, abrasives, saw blades, cutting tools and safety supplies. Last year, Hub Industrial had sales of just under $10 million.

At first glance, the two companies seem to be vastly different, but they've employed a few similar methods to pick up new business, including more focused sales targets and upgrading some of their catalogs.

“New business” is not always synonymous with “new customers.” For Gabriel Curry, president of Hub Industrial, any move towards new business tends to be as much market driven as customer driven.

Hub Industrial's target accounts are typically OEMs, most of them having 20 to 100 employees, Curry says. They represent a variety of industries, including residential and commercial construction, metals and automotive.

“We want business that will flatter our core competencies,” he says. “We want to grow our existing accounts, but we'll also look at businesses we want [to add].”

Curry and his sales staff meet regularly to discuss why a market may be slowing down—and whether it is one they should stay active in or just continue to monitor.

“We constantly [examine] what worked and what didn't work,” Curry says. “We look and see if what we're investing today will pay off when a particular market comes back up.”

But there is also a limit as to what business and product lines Hub Industrial will go after.

“Sometimes you have to say no to business that doesn't fit your model,” he says. “For example, if we're going to do MRO supplies, but not do hydraulic fittings, and a customer asks us to do hydraulic fittings—we have to have the guts to say no to them.”

Saying no to new business and new potential profits is harder to do than it sounds, Curry admits. It's difficult, especially for a small distributor, to say no to potentially very tempting dollar signs.

“That's very tough [to do]. I read once where, in management, it's much easier sometimes to say 'yes' than to say 'no.' But you have to have the guts to say, 'We just can't do it,'” Curry says. “And we've found many times that if you don't have those guts, you get yourself in trouble trying to do something you're not good at.”

When seeking new business, having limitations is not necessarily a bad thing. Once a company recognizes the limitations on what it can do and what it can offer, they can improve on them and, eventually, capitalize on them, Curry suggests.

“We're not Grainger or MSC. We can't compete with them,” he says. “We instead try to do better the things that we're already good at.”

Capitalizing on limitations, in Hub Industrial's case, can also mean emphasizing the items your company does carry and maximizing their values and sales potential. This has been a factor in attracting new business this year, Curry notes, which has enabled the company to keep its total sales level with 2006.

“A lot of our customers' [business] has been down 40 percent, even 50 percent [this year],” Curry explains, referring to residential construction customers in particular. “But we have not seen a drop in sales. Last year was a record year and we are right at that [level] this year.”

Hub Industrial will look at a specific market or account, what worked for the customer as well as the company and evaluate potential for future profit.

“If a market is declining, we look at why it's declining,” he says. “Is it us? Is it the competition? Is it the market itself? That data helps you pick what markets you should go into. We apply that all over the place.”

Such planning and analysis led Hub Industrial to give private labeling a try this year. Initial results have been good, Curry says, explaining that the products Hub has private-labeled include aerosol spray paints and fasteners. And the company has also modified its catalog.

“We've printed a catalog and every item, unless noted, is in stock. We'll ship product orders up to 6 p.m. each day,” Curry says. “That's been our biggest growth [tactic] for new business. That has helped us grow current accounts while also picking up a few new customers.”

The larger the customer, the more business they'll bring to your company, right? Well, at first. But landing the super-sized account can also be a source of concern. When that company begins to represent too large a piece of a distributor's overall profits, problems can result should that large customer ever become smaller.

The 80-20 rule is all well and good, but when one customer represents too large a piece of the profits, the downside can be dramatic. Curry knows of one Florida company that represents 80 percent of a particular distributor's business.

“And if that customer's business slows down, and they're 80 percent, you've got a problem,” he says.

Hub Industrial's much larger distribution peer at Dillon Supply Co. can identify with the large customer problem. In recent years, president Dean Wagoner has made it a point to focus more on small- to medium-sized customers in order to avoid becoming too reliant on large, but more volatile, accounts. It is part of an ongoing attempt to diversify Dillon's customer base, Wagoner says.

“We'll continue to focus not just on the large accounts, but the smaller and medium-sized ones,” he explains. “We still pursue larger accounts. In fact, we have a team here that does that and we'll treat it accordingly. But we want to diversify our business as much as we can.”

That effort to serve smaller customers has helped Dillon Supply grow sales.

“Over the past three to five years, we realized we had to diversify our business,” Wagoner says. “With the shrinking industrial market, we knew we needed to go after new ones. In years past, we had shied away from or ignored some of the smaller customers that had made Dillon what it was going back 90-plus years.”

Many of those smaller customers had been buying from catalog houses, Wagoner says.

“There was a huge market there where we knew we could provide better service and hopefully better products and a broader range than they could get from the catalog houses,” Wagoner says.

For example, Dillon began selling more to small metalworking companies. Many of the company's larger locations have steel service centers, where small customers can buy steel.

“The smaller metalworking shops were buying a piece of steel from us here and there,” he says. “If they are buying steel, they'll be needing abrasives. They'll also need cutting tools, primer, safety supplies—all the other products we have to go along with that steel.”

In exploring this approach, Wagoner recalls, he and his sales staff found that Dillon Supply “had literally thousands of customers set up in our database—smaller customers that at one time or another had bought from us. But we didn't know them and they didn't know us. So we wanted focus on them first.”

Just as Hub Industrial seeks to “flatter [its] core competencies,” so too does Dillon Supply aim towards its own unique strengths.

“By working with the resources we have, we wanted to pursue what we could best service,” Wagoner explains.

So Dillon Supply created a specialized sales force aimed at smaller customers and also strengthened its focus on the commercial construction market.

“We hired contractor salespeople that focus on [commercial construction] business,” he says. “We also created some [sales] tools to help both those sales forces.”

One such tool was a series of market-specific catalogs, each aimed at the industries Dillon is pursuing—for example, metal working shops or commercial real estate. Many of these are also available on its Web site. Once the smaller potential customers were identified, the company gave the sales force a list of target accounts to pursue, Wagoner says.

“So far, that's been successful; we've seen tremendous growth. But [smaller customers] are still a small part of our business,” Wagoner says. “Hopefully, in the years to come, that segment will continue to grow.”