How much do you really spend on what you do?
Making an honest pound used to be simple. The cost was time. You bought stuff, people laboured over stuff and you sold stuff. Probably just one sort of stuff. So Henry Ford had a good idea of how much a Model T cost to build.
But now we make a whole range of things, with machinery and subcontractors, and to sell it we have marketing, sales, accounts receivable... It's a complex web and the cost drivers get lost in the accounts. Still, hey, there's more money coming in than going out, so it's all cool, yeah?
Until you take a real look at it. Wal-Mart did and found that 75 per cent of the cost of their huge purchasing operation was to buy things that made less than five per cent of their profit.
How much does what you do
really cost you?
Making the most of your business comes from understanding your costs against how much revenue you receive from customers.
At least that’s where most advisers leave it.
Pity it’s not that simple. Every process has specific costs attached to it. For example, one product might generate twice as many sales but half the revenue. Traditional analysis allocates costs of sales ledger by proportion of revenue. Yet it costs just as much to raise each invoice. So this product might be costing you FOUR TIMES AS MUCH in costs as you are allocating. That has an impact on the profitability of that line.
So how much are you really spending on what you do?
Shouldn’t you find out?
Shouldn’t you do something about it?
Product Profit drivers starts your road to prosperity by:
examining your products and services
mapping these to find the underlying processes
putting the true cost to them, showing you how much each product actually costs
Armed with this foundation, it becomes clear where your profit is being made and where it is being spent.
Knowing where to put your effort is the key to unlocking product profitability.
