ControllerWindshield · Where are we right now?
How can we improve profits?
Profit improves fastest when you know where it comes from. Start with margin by line, then fix the weakest and grow the strongest.
A single company-wide margin hides a mix. Some services, products or customers carry the business while others quietly lose money.
An approach
- Pick your lines. Group revenue into three to six lines that match how you sell: service types, product families, job types or customer groups.
- Assign the direct costs. For each line, gather the costs that rise and fall with it: materials, direct labor, subcontractors, shipping.
- Calculate gross margin by line. Revenue minus direct costs, divided by revenue.
- Rank them. Which lines bring in the most margin dollars? Which have the thinnest margin percent?
- Decide. Reprice, rescope or stop selling the weakest line, and push harder on the strongest.
You can answer it when
- You see margin by product, service line or job every month.
- You know which one change would improve profit most.
Related
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