I recently came across an interesting innovation that actually drives product profitibilty. The innovation comes from a Sweden-based company called Scorebase. According to the founder, Börje Paulsson, what started as a technique for analysing business data to track profitibility at the various phases that the product goes from production to market, has developed into a powerful analysis tool which has become a valuable piece of software for his clients. The application is called ProfitFinder and is more than a profitibility analysis tool.
Gross Profit is defined as sales minus all expenses directly related to these sales. PROBLEM: GP does not consider fixed costs in production and marketing
Net Profit is defined as total revenue minus total expenses. PROBLEM: NP is normally measured monthly and is not easy to measure by customer/ product combination more frequently.
- You can identify and reduce waste in your production process, & reduce direct costs;
- You can understand and manage how indirect costs impact your product cost;
- Quantify and manage your direct sales costs by customer. How much more are you paying in shipping for the same product for different customers? How much of a sale-person's time is being spent on marketing/ selling to a specific customer? Are yoru marketing dollars spent in the right area?
- Indentify and manage how indirect marketing costs are being allocated to products.
- Rank performance across market segements more accurately - better plan your marketing campaigns.
- Not have to wait until the end of the financial period to know what you net profit is!