Profit · Starter guide
Why more sales don’t always produce more profit
A practical guide to finding where additional revenue is disappearing before it reaches the bottom line.
Start with the work, not just the total.
Compare the revenue and direct cost of your main products, services and customers. A growing sales total can hide a shift toward lower-margin work. Look at changes in discounts, material costs, freight, overtime and rework.
Separate growth from improvement.
Compare gross margin and operating profit with the same period last year. Ask which costs grew faster than revenue and why. Distinguish temporary growth investments from costs that are becoming permanent.
Make one issue actionable.
Choose one source of margin loss, name the person responsible for investigating it, and agree on a measurable next step. Review whether the action changes the result—not simply whether the task was completed.
Questions for your next management discussion
- Which customers or jobs generate activity but little contribution?
- Where are exceptions, discounts or rework eroding the margin?
- What would we change if we looked at profit by customer rather than revenue alone?
15 minutes. Owner to operator.
Start with the problem.
If this sounds familiar, tell me what is happening in your business. We can start with a short conversation.
Erich Stolz, CTP
832-372-5419
CFO@1CFOcenter.com