Learn the basics of time-based profit tracking.
A whole new vision instrument for looking at profits.
Breakthroughs in ‘vision instruments’ revolutionize entire fields. Think of the shift from optical to electron microscopes or from land-based telescopes to the Hubble space telescope. At Profit Velocity, we think of traditional profit margin analysis to be much like an x-ray. It provides useful information, but it only reveals a fraction of what’s going on in a business. Our time-based analytics work more like MRI scanners. We reveal the complete picture of profitability, so decision-makers can make far better choices.
Data analytics that actually make you money.
Isn’t it time someone harnessed the power of data analytics to help manufacturers make more money? That’s exactly what Profit Velocity has done. We’ve developed a pragmatic approach to converting readily available data into valuable insights on precisely how fast products, orders, customers, market segments, machines and plants make money for investors. This enables decision-makers to see the adjustments they need to make to accelerate the flow of profits to the bottom line.
Just because you’ve never seen it doesn’t mean it’s not true.
Our time-based profit analytics and data visualizations turn oceans of transaction data into penetrating ‘profit vision’ that highlights specific, achievable profit gain opportunities. Investors and financial analysts tend to grasp our novel time-based approach faster than most accountants and controllers. Why? Because they have to build value quickly to achieve rewarding exits. They know that ‘time is money’ is more than just a saying.
That’s right, we reinvented management accounting.
Traditional management accounting focuses on measuring production cost per unit and profit per unit. But now that vast troves of transaction data have become readily available, new possibilities for deeper insight have opened up. At Profit Velocity, we integrate productivity metrics with traditional unit-margin analytics to compute exactly how fast machines are generating profit for investors.
Our approach appeals to investors because manufacturing cost-per-unit and margin-per-unit metrics are not what they actually want. What they really want to know is: ‘How fast are we making money?’ and, more importantly, ‘What can we do to speed things up?’
We brought the DuPont Profit Model to life.
The DuPont Profit Formula is more than a century old and is taught in every finance program. But even though this formula elegantly captures the essence of financial strategy, its lessons don’t connect with the traditional management accounting model that focuses on manufacturing cost per unit and margin per unit. Profit Velocity’s vision is to bring time back into the equation and turn the DuPont Profit Model into a practical business tool – one that helps consultants, investors and manufacturing executives make far more profitable decisions for shareholders.
Fast nickels versus slow dimes.
Retailers often ask themselves whether they put more dollars on the bottom line by selling ‘fast nickels or slow dimes.’ It doesn’t take any fancy math to figure out that if the ‘low-margin’ nickels move off the shelf more than twice as fast as the ‘high-margin’ dimes, those nickels will put more total dollars in the bank each month.
The analytics required to solve this ‘product mix’ problem become immensely more challenging when a complex manufacturer is trying to make SKU rationalization decisions for thousands of distinct products moving through key production steps at different speeds for many customers from multiple facilities in varying order quantities at many price points. Fortunately, Profit Velocity has cracked the case. By leveraging our proprietary time-based profit analytics to make subtle changes to product mix and customer mix, decision-makers can put far more dollars on their bottom line.
An advanced course in profit analysis in 3 steps.
Only time-based metrics can unlock your true profit potential.
Complex manufacturing businesses typically produce thousands of product varieties for hundreds of customers. No wonder they’re so difficult to optimize. Despite tracking massive amounts of data, management teams often have access to precious little insight into how they can actually improve results with existing manufacturing KPIs.
By converting oceans of ‘big data’ into highly revealing graphics and interactive ‘what if’ planning scenarios, Profit Velocity helps you zero in on the key points of leverage that will help you maximize your revenue, profits and competitive position. Our method builds upon traditional margin metrics and takes into consideration how fast each unit physically flows through key production assets to calculate its ‘profit per machine hour’ or ‘profit velocity.’
Based on a traditional margin per unit analysis, Product B is 50% more profitable than Product A. But when the speed of production is factored in, it becomes clear that Product A delivers 33% higher returns to investors than Product B.
Time-based profit metrics leave traditional profit per unit in the dust.
While universally used, conventional margin-per-unit metrics do little to help managers maximize quarterly revenue and profit. This is why leading consultants, private equity investors and operating executives love what we offer. With remarkably little time and effort to set up, Profit Velocity taps into existing data sources and converts them into actionable insights that help decision-makers dramatically improve profitability. We make it crystal clear where your best opportunities are and how to capture them.
Any financial controller will tell you that the blue ball in the upper left represents the most profitable product in this portfolio because it has the highest margin per unit. But from an investor’s standpoint, the product represented by the orange ball to the upper right generates the highest Return on Assets (ROA) since it yields more margin dollars per machine hour given its much faster production speed. This is the type of business intelligence manufacturing industry leaders desperately need, but cannot find anywhere else.
Mind the profit gap!
Our ability to measure profit per hour with precision allows Profit Velocity to calculate the ‘profit gap’ that exists between current profits and what the manufacturer could be making from the same products at the same facilities. Our unique ability to quantify these gaps empowers decision-makers to make gradual adjustments to the product mix and customer mix that unleash remarkable profit gains.
The great majority of complex manufacturers have no idea that these profit gaps even exist, because they cannot measure the profit velocity of their products, customers, machines, etc. But armed with the new information Profit Velocity provides, business analysts and decision-makers can profoundly alter the competitive position and financial performance of even large and complex manufacturing firms.
Notice the huge ‘profit gap’ that exists in this all-too-common manufacturing scenario. This company actually earns 70% of its total margin in the 20% of the time that it’s making its highest profit-per-hour products. It loses 7% of its total margin during the 20% of the time it’s making its lowest profit-per-hour products.
Founder and Author
Michael Rothschild founded Profit Velocity over a decade ago to create a new generation of profit analytics tools that would enable highly complex manufacturing enterprises to dramatically improve shareholder returns.
Find out about how Michael’s breakthrough book Bionomics led him to rethink conventional management accounting and enable genuine breakthroughs in business performance.
Get in Touch
If you’re interested in learning more, we’d love to hear from you.
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San Francisco, CA 94105