Most distribution organizations don’t generate as high a profit as they should. This is because profit is not really planned and firms continue to worry about the wrong things.
In most cases profits are simply viewed as what is left over after all of the expenses have been paid. As a result, profits are seldom adequate. Firms need to move to a “profit first” approach to planning. With such an approach profit is the first item developed in a plan and all of the other elements of the planning process revolve around reaching that profit goal.
In addition, too many firms waste their time and energy in areas that do not dramatically improve results. For example, the trade-off between driving more sales volume or raising prices must be clearly understood. Without proper focus, reaching a profit goal is simply not possible.
Question of the Day
We feel we have to get more price aggressive to drive up our sales volume. How large of a sales increase will be required to offset a price cut?
Probably a lot more than you think.