Are you profitable? That is the question. For most leaders, at a basic level profit means that there revenue covers their expenses with some dollars left over. Pretty basic. The idea of creating metrics based on profit is not as basic.
When we dig into profitability, some questions deserve exploring.
Digging into these questions will undoubtedly create additional assessments.
To truly understand profitability, you will need to dig into your current COGS calculation. There is no reason to tie metrics to gross profit if you aren’t sure that your COGS is accurate. While you may be thinking, “we better know that” there are reasons why your COGS may not be correct. Ultimately it may come from:
If you are pretty confident that your COGS and operating costs are accurate and allocated adequately, then you can use Gross Profit or even Operating Profit as a critical metric.
However, most of us need to dive into the above bullet points to create metrics that drive true profitability. This digging is where the rubber meets the road.
Let’s look at four leadership discussion points that you may be able to use to create meaningful KPI’s (that drive profitability).
There’s no doubt that building metrics and, or KPI’s based on driving profitability benefits everyone in an organization. However, starting or finding time for these problematic leadership conversations can be a monumental task. Having an outside professional drive the discussions can take off the internal pressure.
Ready to start the conversations? Get in touch today at email@example.com.