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 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 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 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 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 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 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 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 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 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.