Understanding the new drivers of profitability
The economic upheaval of the last couple of years has caused many firms to make significant changes in their operation. To a large extent, those changes caused the typical firm to end up "leaner and meaner" than it was before. It is now time to ensure that those changes also lead to improved profit performance.
The 2012 EASA Operating Performance Report (of 2011 data) suggests that at least some firms are well on their way to outstanding long-term profit performance. The key to understanding the economics of profitability is to distinguish between the performance of the typical firm and the high-profit firm.The difference is significant and appears to be widening.
Items discussed include:
- Typical versus high profit
- Driving profit to their maximum level
- Sales growth
- Gross margin
- Payroll expenses
- Non-payroll expenses
(This article is based on 103 participants in the EASA 2012 Operating Performance Survey.)