Managing for Profit

Managing profitability means managing all the components of profitability. Those components include Gross Revenue (Sales), Cost of Goods Sold or Cost of Services Provided, Gross Profit & Gross Profit Margin, Other Operating Expenses, Operating Profit, Other Income & Expenses, and Income Taxes.

Break-even is the dollar volume of sales above which your business begins to be earn a profit. Determining the break-even point is a function of the relationship between Gross Profit Margin and Operating Expenses. Exceeding this break-even volume every month creates future positive cash flow as well as profitability. Below break-even volume results in negative cash flow and losses.

Many businesses focus on the dollar volume of sales but have little idea of how each sale affects the overall profitability of the business. Profitability is impacted not only by the dollar volume of sales but also by the product/service mix of sales. Some products or services my contribute more profit than others and require more or less in operating expenses.

CRS Profitability Analysis, Industry Specific Comparative Analysis, and Industry Specific Key Performance Ratios will help you gain better insight into increasing the profitability of your business.