Profit Optimization

Optimizing Revenues and Costs

Too often the imperatives to take out costs and grow revenues are not coordinated. Successful earnings growth requires making trade-offs.

Shifting revenue and cost curves.

Are growing revenues your priority, or is taking out cost? Are you willing to take on both? Too often, companies focus on one or the other, or, when they do both, it's uncoordinated and sometimes contentious. Correlations must be understood and strategic questions must be answered. Decisions and trade-offs must be made. 

Is all revenue good? 

Are you selling into profitable agreements? 

Are you prepared to walk away from low margin accounts? 

Are you informed enough to deliberately shift our book mix toward more profitable customer segments? 

Are sales incentives aligned to profitability goals? 

Are you conceding too much in the near-term for the hope of long-term benefit?

Is all cost bad?

Are you targeting absolute or relative cost reduction? 

Is the goal margin expansion or cost-takeout? 

Is leadership aligned to a scenario where revenue growth requires costs to increase, albeit at a slower pace than revenue? 

What are the long-term implications of revenue growth and expense reduction?

Are revenue and cost targets aligned to growth or exit strategies? 

Is service delivery or customer satisfaction at risk? 

Will lack of investment leave the business vulnerable down the road? 

Other considerations

Are there other factors that need to be considered based on your business model? E.g., investment income, capital adequacy, rating agency ratings, the derivative value of a customer, vertical integration opportunities, or other factors that contribute to your company's earnings and valuation. 

Absolute cost reduction and revenue growth

Growing revenues faster than costs

Shifting book mix toward higher margin clients

What to do?

The first step is to gain agreement among leaders. That will allow you to move at pace and get the entire company aligned to shared objectives. From there, you'll be able to employ tried and true approaches to growing revenues and reducing costs to optimize profitability and earnings growth

Levers to Pull

"Grow revenues and cut costs!" If only it were so easy. Too often, knee-jerk responses like broad-based staffing cuts and low-margin sales look good in the short-term, but don't drive sustainable earnings growth. Working through these revenue drivers and cost levers in a coordinated way will help you achieve better results.

Revenue Drivers

Cost Levers

Need help?

Putting all the puzzle pieces together isn't easy. Schedule an appointment to talk to us about the problems you need help solving.