Great, but why not make more? It’s already in your company don’t let it escape! All the research shows that everyone is losing money on some customers and the final result depends on how much you make from each customer. Look at our decision tree
Even more reason to capture more profit. Low margins show a commodity market, so you need more profit to get your price a bit lower. But there is always someone who can undercut you so use the money in the company to invest in the future. Remember, if you can’t afford to develop it, then you can’t develop it and then it’s too late.
Companies find that they can increase their profit margin by up to 50 per cent. That’s taking net profit from six per cent to 9 per cent, for example.
Every situation is different. Yet looking at the drivers for activities creates new perspectives. Marvin Minsky once said that if you only see a problem from one perspective, then you don’t understand the problem. We have become so fixed in our way of working that we can’t see another, better, solution.
There are cases where there are just one product and service being sold to a few customers. In which case, congratulations. You already know how much your product costs and have a good idea how much your customers cost you. But as soon as customers start purchasing from a range and you start making a number of products then costs have to be allocated accurately or you will be losing money.
Profit Per Minute provides a strategic service, not an accounting one. You still have to provide accounts to satisfy the Inland Revenue. But finance is focused on the money you have and how to account for it – accruals, Work In Progress, depreciation, etc. We focus on how to make more profit from what you do by understanding what you do.
