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:
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price
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fixed and variable costs
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sales volume
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inventory
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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:
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productivity
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client satisfaction
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quality of a product or service
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training of employees
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employee satisfaction
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business culture and values
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product and process innovation
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market share
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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.
