8 principles of quantum profit management
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8 Principles of Quantum Profit Management. presented by WayPoint Analytics Merrifield Consulting. QPM Principle #1. You’re Making More Money than You Know all companies have internal profits magnitude of the internal profits can be significant

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8 principles of quantum profit management

8 Principles ofQuantum Profit Management

presented byWayPoint AnalyticsMerrifield Consulting

qpm principle 1
QPM Principle #1
  • You’re Making More Money than You Know
    • all companies have internal profits
    • magnitude of the internal profits can be significant
    • internal profits are being diverted away from the bottom line
    • correcting this is completely in your control
    • act to identify and retain more of the company’s internal profits
qpm principle 2
QPM Principle #2
  • Measure & Evaluate at the Quantum Level
    • simpler to measure
    • more direct control
    • consumes less time / resources
    • reduces risk of errors
    • target for high-leverage results
    • analyze and manage the business at the granular level
qpm principle 3
QPM Principle #3
  • Measure & Manage on Net Profit
    • Net profit rarely correlates to GP/GM%
    • GP/GM% doesn’t account for CTS variances
    • GP incentives drive dysfunction:
      • GP% mirage
      • work against your true objectives
      • pits management vs sales force
    • GP/GM% evaluation drives poor decision-making
    • use Net Profit for decision-making
qpm principle 4
QPM Principle #4
  • Manage the deltas
    • profit improvement is the main purpose of executive management
    • focus on profit improvement management can differentiate a company from competitors
    • profit deltas in customers, territories, product lines and vendors can all contribute
    • drive profit improvement at the quantum level
qpm principle 5
QPM Principle #5
  • Financial Averages Mask Reality
    • every segment is made up of components
    • component performance can vary wildly
    • analyze and investigate homogeneous segments
    • homogeneous segments lend themselves to uniform, profitable service models
    • dig deep enough to find segments with homogeneous performance
qpm principle 6
QPM Principle #6
  • Understand and Manage Service Models
    • make money on everything you do
    • every segment needs its own profitable service model
    • service models must fit within the GP/Margin envelope of the segment
    • profitable segment service models eliminate cross-subsidies, and divert profits back to the company
    • develop profitable service models for every segment
qpm principle 7
QPM Principle #7
  • Identify and Manage Cross-Subsidies
    • in every business, profitable segments generate profits consumed by losing segments
    • some cross-subsidies are intentional and strategic
    • segments can have their own cross-subsidies
    • cross-subsidies consume the bulk of every business’ profits
    • identify and manage cross-subsidies strategically
qpm principle 8
QPM Principle #8
  • Align Goals & Incentives with Net Profit
    • make sure everyone has the same goals as the company and senior management
    • make sure incentive aren’t driving dysfunctional or counter-productive behavior
    • ensure all incentives are based on Net Profit or CTS improvments
8 principles of qpm
8 Principles of QPM
  • You\'re making more money than you know.
  • Measure and evaluate at the quantum level.
  • Manage on net profit.
  • Manage the deltas.
  • Financial averages mask what\'s really going on.
  • Understand and manage service models.
  • Identify and stop non-strategic cross-subsidies.
  • Synchronize goals & incentives.
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