#CSIA #Pauto
Dr. Al Bates from the Profit Planning Group on how to make more profit as a system integrator (or anybody else, for that matter):
How to set a realistic profit target--
how much, how fast?
Develop an action program to reach the profit target: priorities for action and realistic improvements
The two requirements of any business proposition are adequate salary for hours worked and adequate profit to cover the risks you take.
We are taking a look at a ficticious company called Mountain View Inc.
Your gross margin is by definition "too low."
2% Return on Sales is minimum, 4% is adequate and 8% is high profit.
A realistic profit goal is 7% to 8% ROS in five years.
The only three things firms need to worry about are improving the gross margin percentage, controlling payroll, and actually managing with a plan.
Most small businesses do NOT manage with a plan. "You just buy crap and sell it."
A one percent improvement in:
Pricing yields 47.5% increase in profit
Buying yields 35.0% increase in profit
Unit Sales yields a 12.5% increase in profit
Fixed Costs yields an 11.5% increase in profit
Improving performance requires the right profit priorities.
We must plan payroll in relationship to sales.
You can improve gross margin by controlling sales force pricing decisions.
