New "Real Profit Drivers" Supplement for PAR Reports
Dr. Albert Bates, President — Profit Planning Group
• competitive strategy • profit analytics • profit reports • profit strategy • Profit Planning Group • PAR Reports • distribution industry associations
Monday, January 19, 2015—Have you ever wondered how your company's performance stacks up against businesses in other industries? I recently sat down with my friend, Al Bates from the Profit Planning Group, and discussed the real profit drivers initiative, and how it may prove invaluable for decision-makers.
Al told me that over the years, he'd often been asked whether it's possible to compare profitability across industries. He explained that it's hard to do because industries are so different. His company has, however, put together some methodologies and then looked at 18 lines of trade, across 885 distributors, to find some commonalities. These are global concepts that management can implement to be more successful.
"The key finding was that gross margin and expenses are often joined at the hip", Al explained. "However, some companies recognized that they could be more profitable by cutting expenses more effectively than their competition. This is true in both high and low gross margin industries. If you can break that gross margin-expense linkage then your profits will just be that much higher than your that of your competition."
"When we looked at most companies' strategies", Al continued, "we realized that their efforts were focused elsewhere. The linkage between gross margin and expenses is basically the key to life, but very few companies seemed to either acknowledge or act upon this information. Instead, companies were focused on growing sales or turning inventory faster, which doesn't have as great of an impact on the bottom line."
Much of the reason why companies like McDonald's, Wal-Mart, and Toyota have enjoyed immense profitability is because they have excellent analytics and metrics which help them to manage their expenses at the margin level. Here at WayPoint Analytics, we've also seen profits explode in clients who put the effort into managing their expenses. It's not all that hard to do, either. By understanding and managing transactional costs, any company could see a significant increase to its bottom line.
For more information about Dr. Albert Bates, visit: www.profitplanninggroup.com