Delivery of revenue growth without margin will not help the company achieve its forecasted profit objectives. On the other hand, margin without revenue growth can be a limiting factor. While it may result in some profit, it will not assist the company to achieve the growth expectations of its stakeholders and field salespeople.
Where does your profit really come from? At a fast-food establishment, for example, a fountain drink is likely a key profit driver relative to other elements of the meal. Or take giant online retailer Amazon. It makes its money as an e-commerce giant by selling goods, right? A closer look would show that the majority of its profits come not from e-commerce sales but from its third-party marketplace, media, and growing web and cloud services. Unpack your profit margin to see where you really want to drive your sales — to higher-margin areas.
A practical approach is to divide your revenue into higher-margin and lower-margin categories. What is a benchmark for a good margin? If we increased price, did we lose volume? How well did we pass through costs? How much margin growth came from price? These are just a few of the valuable data points we can derive. The Margin Driver Analysis is more than a business intelligence tool. It tells the complete story of business performance based on user-defined time periods and granular data slices such as product, customer or region.
For example, the tool tells you that year-over-year a product grew in revenue and profit, but there was a noticeable dip in margin rate. How did this happen? In this case, you may discover that while your procurement team was successful in securing lower costs, you gave away most of those savings when it came to price.
Perhaps you also saw a shift in mix to historically lower margin products. Now say you run the Margin Driver Analysis and find that sales reps in one particular branch office are dragging your margins down by consistently overriding prices or creating special price exceptions. Over six years, with a 10 percent improvement in HCAHPS scores, hospital margins saw 70 percent growth, the study showed. The pattern holds true for hospitals of all sizes and categories, from stand-alone to systems owned, nonprofit or for profit, urban or rural.
However, urban hospitals did achieve margin increases that were about eight times higher than rural ones, suggesting high-performing urban hospitals could double their margins compared to average-performing urban facilities.
The data point to the need to at least re-examine profit growth strategies, especially when considering cutting jobs or services, and place greater emphasis on "patient-centric enhancements". Skip to main content. AbbVie imposes B pricing restrictions at community pharmacies. Revenue Cycle Management.
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