Measuring Profitability Based on Efficiency

Measuring Profitability Based on Efficiency

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The primary mission of a business is long-term profitability not just revenue growth.  Profitability is a measurement of efficiency.  It is ultimately the deciding factor in the success or failure of a business.  It is expressed as a relative not an absolute amount. Profitability measures the capacity of a business to produce a return on an investment based on its resources in comparison to an alternative investment.

Revenue versus Profit Growth

More revenue from sales does not always mean more profit.  Revenue is only part of the equation.  Revenue minus expenses equals profit.  It is true a business must keep their costs as low as possible to make sure it is maximizing its profits.  The real question is how does a company maximize its profits?

The key is to answer some very important questions about your business relative to your industry.  Some of these questions are as follows:

What is the state of your industry relative to the overall economy?

How big is your market opportunity and how fast is it growing?

Is your business privately owned or funded by venture capital in return for an equity share of your organization?

Was your enterprise the first supplier in the marketplace?

Does your firm have patents, trademarks or substantial product complexity to protect your market position?

Do you have a competitive advantage in the industry that you can increase over time?

Sustained Profitability

Many organizations depend on revenue growth to determine the scale of the business.  The real determinant of growth is creating long-term profitability through efficient operations.  This point is made clear in Pacific Crest Group’s (PCG) Key Performance Indicator (KPI) guideline.

By installing an interim Chief Financial Officer and applying KPI strategies, PCG has streamlined internal accounting processes, increased the efficiency of the technology infrastructure and improved employee management for many businesses.  Utilizing these types of strategies has repeatedly resulted in large operation cost savings, better cash flow management and greater profitability for our clients.

How We Can Help You

Pacific Crest Group provides professional services that keep your business focused on your critical objectives.  We provide strategic Accounting and Human Resource (HR) services created specifically to help you meet your goals. Through exemplary customer service, clearly defined policies and procedures as well as a forward looking perspective, we provide the outsourced solutions your business needs to grow. A PCG professional is happy to meet with you to discuss solutions for your unique requirements designed to maximize all of your business opportunities.