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What are profit drivers?

Posted on 18 February '16 by , under General News.

Profit drivers are determinants that have a significant impact on a business’s bottom line. They are often categorised as financial and non-financial drivers.

Financial profit drivers are directly connected with dollar figures and are most commonly considered in relation to profit. Examples of financial profit drivers include:

  • price

  • fixed and variable costs

  • sales volume

  • inventory

  • cost of debt

Non-financial profit drivers also impact a business’s bottom line, even though they’re not expressed in dollar terms. Client satisfaction and bad weather are two examples of non-financial profit drivers that can have an impact on sales and an increase or decrease profit. Non-financial profit drivers include:

  • productivity

  • client satisfaction

  • quality of a product or service

  • training of employees

  • employee satisfaction

  • business culture and values

  • product and process innovation

  • market share

  • employee safety

Businesses should keep track of their profit drivers and their relative importance. Working out why they’re important to the success of a business and regularly measuring their impact can help owners evaluate the success of a business’s strategies.