Customer and Product Profitability Modelling for Business Success
If your business is stuck and doesn’t grow – then it is time to remove the dead weight. Let’s clarify – if you’re not generating enough profit, it is because you are just attempting to work harder. Instead, it is time to work smarter. By using the wrong revenue model, incorrect product price structuring and focusing on the wrong customers, it eats into business resources and ultimately, profits.
Most businesses have a costing model that assigns costs to products/services and customers on a broad-brush basis, which means that the calculated costs are not truly reflective of the real costs. This, in turn, means that some products and customer profits are overstated, and some are understated. The result is that the business doesn’t focus on delivering the optimal mix and ultimately loses money or doesn’t make as much as it could.
In some business, you will find that only 5 out of 50 customers make up 90% of the profit. The next 40 customers make a further 20% profit and the last 5 customers destroy about 10% of the profit. If one could focus on the 5 customers bringing in 90% of the profit, one could reduce the overheads and try to find another 5 customers like the original 5, in order to double the profits. In this situation, with the right information, one can stop chasing rats and mice, as well as losing out on opportunities to go places.
How We Can Help Your Business Realise Maximum Profits
We will analyse your customers and products to identify which customers cause the business to lose money and on which business strategies you should focus. The analysis will help you to save on unnecessary overheads and ultimately become significantly more profitable by focusing on good profitable business.
You will receive a strategic model that splits all your revenues and costs by activity, resource, product and customer, and helps you harvest things that work well, as well as cut out waste that is destroying value – this could be a product, service, customer, process or person.
It will help you to:
- Identify profitable products and customers.
- Provide detailed information to help you ask customers for increases to reduce losses.
- Understand which departments are wasteful or have excess capacity.
- Provide information, statistics and metrics that prove which processes and departments have inefficiencies and need to be re-engineered or optimised.
- Set the correct product and service pricing per customer to ensure that you remain profitable and that you don’t cross-subsidise the poor performing customers with the profits from the high performance customers.
Make use of our experts to help you design a business model that works not just for the customers, but ensures profitability and thus the success of your business.