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Get the Most Out Of Your Profitability with These 4 Steps

Finance professionals want to get the best and most accurate analysis of their profitability. Without a true analysis of profitability, vital business decisions could be misguided. Here at 3C Software, we work a lot with our customers to help them get a complete picture of their company’s profits across all dimensions in order to make better business decisions.  In a recent article by Forbes, “Four Steps for Assessing Product Profitability,” Matt Freeman discusses the important of assessing your product profitability each month. This could in turn lead to increased profits and overall financial success.

Double explosure with working businessman and business chart

He recommends 4 steps to assess a company’s profitability:

1. Documentation

Documenting product profitability is important because it gives a more precise picture of product performance. When analyzing this information, companies are able to create an action plan with the use of clear results, measurable targets and timely reviews. This information helps to determine which products are more profitable and helps the company set more attainable goals.

2. External Analysis

It is important to look at the external factors that impact the profitability of your products. Such external factors include competition for each product, anticipated market changes, inelasticity or elasticity of demand, and opportunities for product improvement or spinoffs. You should assess the impact each factor has on your products, as well as how these factors could affect your product’s profitability at the macro level in the long run. If you want an out-of-the-box approach in marketing your products, there might be a tip on the profile on AgencyReview.ca.

3. Design

Well-designed data reporting is also crucial when focusing on product profitability. This goes back to documentation and how you organize your data. With this disciplined analysis, you are able to avoid an inefficient reporting process and inconsistency in your data. Well- designed reports allow more granular analysis of your data which can lead to better business decisions.

4. Distribution

Once you have a strong framework for analyzing product profitability, it is important to distribute the information within the company. Communicating and educating sales, marketing assistance you can get from a local seo company and operations teams in your organization on what factors impact your company’s profitability is crucial. Once everyone is on the same page, they can all contribute to improving profitability and create ongoing and long-term plans.

Matt Freeman sums up the need for continuous profitability supervision with this example:

A product, such as one containing high fructose corn syrup, which is no longer selling well. Using external analysis, you determine that your competition is likely suffering as well. The ability to adapt with better, healthier ingredients and offer an alternative to consumers can separate your product(s) from those of competitors. The change will require a strategy that engages the product development team, marketing, sales, and production over a period of time.”

This example illustrates the importance of using a disciplined approach to assessing your product profitability so you can plan for the future and understand your profitability and risk.

These four steps for assessing product profitability of products are key to better understanding your business, allowing you to make better product decisions, and lead to long term strategic planning.

Want to learn more about 3C Software’s profitability capabilities and how we can help with these four crucial steps?  Start here.