And that turnover is something that we’ve said publicly before. Historically, for the last five years or so, on our side, we’ve done a lot of work around the cost of the turnover. And we think it’s still $20 plus million a year that’s a real cost to the business of having excessive turnover on the salesforce. And so these are all parts of a very deliberate plan. It has shifted our focus probably our investment more into how to support the team that we’ve got versus trying to figure out how to grow the team constantly. And so there’s been a little bit of compression in the number of field reps that we’ve got. But there’s not been any compression in terms of the total spend. I mean, maybe a little bit, but when you look at the inside sales rep support that we’ve tried to offer to the outside sales reps and then the inside technical support and then the service techs, all of which are counted in that outside salesforce number that we’re looking at, the total headcount isn’t down nearly as much as that leading number on the outside sales force would indicate.
Kevin Steinke: Okay. Great. Thanks for all the insight. I have to jump to another call here. But again thanks for all the commentary. I’ll turn it over.
Bryan King: Thanks Kevin.
Ron Knutson: Thanks Kevin.
Operator: Thank you. Our next question is coming from Tommy Moll with Stephens Inc. Your line is live.
Tommy Moll: Good morning and thank you for taking my questions.
Bryan King: Hey, Tommy.
Ron Knutson: Good morning Tommy.
Tommy Moll: I wanted to continue on the Lawson theme. Bryan, you mentioned a couple of times some of the pressures or uncertainty among — or within the core street business. What’s the state of the union there on leading edge demand across your customer base?
Bryan King: Tommy, it’s hard for me to unpack. There’s customers are so — there’s so many customers in that street business, right? And so when you look at it, it’s tens of thousands of customers. And it’s been hard for us or hard for me over the years. We’re going to get a lot better data out of our CRM or more advanced CRM tool that we’re working with right now. I mean, we’ve got it out in the field being beta worked on. About a quarter of our salesforce is using it this quarter and then it goes to all the salesforce at the beginning of the first quarter. We’ll get a lot better information at least for me, from a data perspective. But that’s where I’m most sensitive about whether or not there’s — what the recessionary pressures are that we’re feeling in the economy, because those are smaller businesses and they’re — the welding shop, they’re the small manufacturer, somebody who’s maybe only buying 1,000 to a couple of thousand dollars a year from us, in some cases even less.
And that business across it looks like it’s soft. We had a 1.4% decline in that small customer street business as opposed to the strategic or the Kent where we had much bigger gains quarter-over-quarter. And that’s where — across our portfolio of businesses, we see kind of the pressures across the economy in the US with interest rates higher and some slowing of business activity. We’re not seeing it with the big strategic customers. Now we’re seeing it in certain industries. But the bigger accounts seem to be — have business activity levels that have been more — again, industry agnostic here that looks more healthy in the current economic backdrop. I do think that there’s — Tommy, we’re — with the program that we put in place with our salesforce and with trying to drive them being sensitive about how they’re investing their time and wanting to make sure that we’re encouraging them to be more productive and to try and drive their compensation up.
There’s probably some concern in my mind that some of the smallest customers may not be seeing their salesperson as often as they used to. We knew we were losing as much as — we did an activity base to exercise on this probably four years ago or five years ago. Our team did it with LKCM Headwater got into the data at Lawson and tried to really look at fully burdening our smallest end of our customer base, and we were losing money on that 10% of the revenue that was the smallest customers. We were — on a fully burdened basis, we were losing like maybe $20 million a year or more. We were losing as much money as it was total revenue. And so I think it’s 5% of the revenue of the business that we’re losing $20 million. And so we knew that we needed to figure out a way to help the salespeople turn those relationships into more profitable relationships.
And we didn’t want to abandon those customers at all. So we were trying to — we’ve worked hard to try to come up with a solution that helps our salesforce continue to serve them, but serve them in a way that’s not eroding their bandwidth at a level where they can’t continue to grow their books of business and make sure that we’re not over serving those customers the way that we historically had been.
Tommy Moll: Thank you Bryan.
Bryan King: I guess what I’m trying to say, Tommy, there could be some denigration on that small street business that is not just economic. It could be — we just aren’t touching them quite as frequently.
Tommy Moll: Yeah, I follow. Thank you. Zooming up to the consolidated company level, you’ve outlined some of the cross currents in terms of the demand environment. I just wondered if you could give us a reasonable expectation for fourth quarter if we just compare to the third quarter results, you did $439 million of revenue, 10% EBITDA margin. Do you have a sense of whether those two points are flat, up, down quarter-over-quarter, if you roll it all together? Thank you.
Ron Knutson: Yeah. So Tommy, this is Ron. So a couple of things to keep in mind relative to Q4. So we do have 61 selling days in the fourth quarter versus 64. I’m sorry, 63 in this quarter, in Q3. So that clearly will have an impact. And even I think everybody kind of realizes that 61 may not really be a full equivalent of 61. So as we think about — and Bryan commented on this, as we sit here through the first month of the quarter, we are seeing kind of a similar mid single digit total sales decline, putting Hisco aside since they were not in the prior year numbers. And so I think as we think about that for Q4, I’m not sure that we’re going to see a fast turnaround here, certainly in November and December. It wouldn’t surprise me that the trend that we saw in October really kind of continue for the remainder of Q4 adjusted for an ADS basis.
