Waking Up To Profit Reality

Nine times out of ten beliefs often drive actions but when those beliefs persist long enough they can fall out of sync with the broader world and be at odds with reality.

Many business disciplines are held beyond reproach such as revenues are good but costs are bad, give the customer what they want and do not interfere when things are running smoothly. Now it could well be that those beliefs are now well past their sell by date and could even be undermining both profitability and success.

Commenting, Gerald Irwin of Sutton Coldfield based Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency said “There is a general assumption that increased revenues equal additional profits but surely that is missing the point. Part of the problem is that traditional accounting categories are far too broad to truly identify which accounts and products are profitable and which are not. What would be helpful to all businesses is to develop a strategy that estimates the profitability of every order line for every customer using transactions over a period of time. The system does not have to be particularly sophisticated but should identify a prime profit trend. Businesses can then set about protecting and cultivating those lines of business.”

We have all grown up in an age of mass markets where businesses attempt to get more and more volume in order to create lower costs through economies of scale. Today there is an explosion of information, real-time visibility, and different pricing for different products. This results in businesses being faced with mass customisation and globalisation with increasingly complex relationships thrown in for good measure. The whole essence of great management is to create a foundation with the right information, the right priorities and the right processes. After all, It is just a different way of managing and improving performance.