Do you know your profit drivers?

Most companies are interested in driving improvements and increasing profit. So how do you increase your profit? The simplest recipe is to decrease your cost and increase your income, but unfortunately it is usually a little bit more complex than that.

A more structured approach would be to identify your profit drivers. The profit drivers are factors that will impact your bottom line result. By identifying them and later on improving them you will increase your profit.

Examples of profit drivers

• Sales volume
• Sales price
• Quality
• Customer satisfaction
• Direct material cost
• Indirect material cost
• Inventory
• Fixed costs
• Cost of debt
• Number of employees
• Salaries
• Employee motivation
• Productivity
• Waste reduction
• Employee competence and skills
• Business culture and values
• Innovation
• Workplace health and safety

Some of the profit drivers can be collected from the financial report, others are more complex to measure and drive.

Most companies drive improvement projects to improve their profit by focusing on the following profit drivers:

• Sales volume
• Sales price
• Quality
• Customer satisfaction
• Direct material cost
• Salaries
• Number of employees
• Productivity

Quick wins as well as long term profitability can usually be achieved by improving the profit drivers above. In our upcoming newsletters we will share some knowledge and experiences on how to improve the different profit drivers. Until then, we propose you start identifying which profit drivers that are relevant for you and what you can do already today to start improving them.