Managing a business for maximum profit is no easy task. A wide range of profit drivers can change margins in an instant. And, profit leaks can drain margins faster than you can grow revenue. Your ability to control these factors determines your company’s financial success and its future.
So, are you in control of profitability? Here are four indicators that determine if you are in control of profitability or if profitability is controlling you.
- Do you wait to see if profit margins are sufficient before making near-term investments? Having control over profit drivers gives you a more confident forecast which, in turn, allows you to invest in your business with confidence.
- Is your visibility to profit drivers limited? Do you have accurate measurement of price, cost, mix and volume and their impact on margins? Each of these critical drivers can be isolated and accurately measured. Knowing that price, for example, and not volume, impacted profit margins for a given market may affect how you direct resources in the future.
- Is cost reduction your only lever to improve margins? For many manufacturing companies, this is the “go to” lever. Price can have dramatic effects on margins. Seeing where you can get more price without losing customers is the key. Gaining insights into these opportunities through sales data analysis is the key.
- Do you know the top three profit leaks in your business? Under priced items, lost freight charges or accounts with poor mix may be the biggest losers. Key performance indicators provide the insights to manage leaks and boost profits.
Controlling profit is easier than it sounds. Three elements can put you in control to ignite profit improvement.
- It all begins with data. Sales invoice data and cost data provide the foundation for profit management. Data analysis will reveal where you’re leaking profit and how to seal those leaks.
- Profit management tools provide all of the necessary analyses so you don’t need to be a data genius to get results. Focus, instead, on making the changes in your business that result in higher margins.
- Assign someone, even as a part-time effort, to identify profit enhancement opportunities. The ROI is huge.
As one CEO of a manufacturing company said, “You will be surprised what you learn about your business” when you apply these analytics.
To learn more about taking control of profitability, contact Ralph Zuponcic or Dick Sobel at PricePoint Partners.