For all but the simplest business, profit is a simple word but a complicated calculation.  That is almost always true, but it is not very often understood.  You almost certainly know the 80/20 rule: you make 80% of your revenues from 20% of your customers.  But if your business is like most, you could double your profits by eliminating the losses you make serving 10% of your customers.

The most common mistake is to ignore internal costs completely, and focus on a simple gross margin calculation.  This is why many businesses serve many customers at a loss without knowing it.

The other main error is to roll up overheads into a cost pool that is then allocated on some formula.  This approach can apparently protect profits, but often at the cost of being needlessly uncompetitive.

There are two phrases that are a giveaway that you have problems: "cost based pricing" and "market pricing."  Both kill companies.

We use profit driver analysis to build up a realistic view of true profitability.  This highlights problem areas and facilitates management debate and practical decision-making.  Early indications are available rapidly, and where appropriate these can be further refined or periodically refreshed.  Concepts like fixed and semi-fixed cost are elusive and confusing, and are often made totally opaque by financial managers who may be trusted to cost for accounting purposes but are unlikely to understand cost analysis for pricing.  Our expertise helps to break through these issues, and you may be surprised how many profitable improvements become obvious once we have shown you the true picture.

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