When business networking, business leaders usually describe their businesses in terms of sales turnover and not margins & hence profits. Further competitors' margins and industry best practice are usually not front of mind! The key determinant of generating cashflow & business value is the gross profit margin where options for "value-adds" for product/services can offset price competition and smart purchasing, rebates & trading terms can lower cost of sales.
Without a focus on these determinants, the flexibility to re-act to price competition and meet fixed overheads is reduced. Businesses again need to think & describe their monthly & YTD overhead cost performance, so that their resultant EBIT return is benchmarked to industry best practice. This EBIT return is the driver for the business value!
For businesses, especially in the SME sector, industry bench marks that can monitor performance at the levels of gross profit & overhead cost performance, should be part of the suite of monthly financial reports reviewed by the business leaders!
Give this area some focus and watch the "bottom-line" improve by generating cash resources from existing clients, to meet the challenges of the "roller coaster" market and they should be part of your innovative commercial solutions to achieve your goals for 2003 and beyond.