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It is easy to focus on sales targets that contribute to a revenue statement. How many times do you hear:

'I have a $1m business

'I have a $50m business and 40 staff'

'I have a $2B business with 20,000 staff'

All these are vanity statements.

Revenue or Sales Turnover, does not tell you the health of a company or whether it is one day away from going bust.

Profit is essential for EVERY organisation, whether you are a for-profit or not-for-profit entity.

You see, creating profits:

  • Ensures you are able to pay suppliers and staff

  • Allow you to build a reserve to invest back into the business

  • Contributes to overall cashflow of the business

  • Meets your statutory obligations of ensuring the business carries on as a going concern

So it is imperative that you do not leak profits. The way we work with businesses from day 1 is to address profit leakages in the business.

Your profits can be impacted from the following (not exhaustive of course):

  1. Raw material costs

  2. Packaging costs

  3. Manufacturing, logistic and quality costs (including fuel and energy costs)

  4. Competitor activities (discounting products relative to your product)

  5. Personnel costs (annual increases or market adjustment increases)

  6. Administrative costs (insurance, IT, marketing, equipment, leases etc)

Understanding the profit levers in the business is essential for the company to react to market changes or the creation of new product entities.

Once you understand those levers you can create metrics to allow real time dashboard monitoring of how you are doing as a business.

This analysis is incredibly important. We have known businesses that have celebrated with Champagne after winning a large tender only to realise 6 months down the road that the tender was unprofitable due to incorrect analysis of the profit levers putting the business into financial jeopardy.

When you deplete cash reserves, because you are NOT generating profit, then the business will go bust - even if the turnover is high.

If you want to know more about creating the metrics for analysing profit levers for your business, then please contact us and take the opportunity to experience our FREE 1h Business Growth Session. Click the link here.

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