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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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