Profitability Comparison Template
This Profitability Comparison template enables you to take a high-level view of the profitability of a range of your products or services over a specified period. By duplicating this template you are able to assess how changes to sales, fixed and variable costs will impact profit contribution.
At the heart of all business is the idea of profitability. Making money on the sale of goods or services is, at the end of the day, what it is all about. If you make a great product and sell millions of units, but make no money at the end of it all, what was the point? Whether you are the owner and looking at the bottom line as your payoff for all of the investment and hard work, or a manager who is measured by the size of the profits, getting a great return is in everyone's best interest.
Oddly, the profitability of individual products is a point that sometimes gets lost in the shuffle of trying to produce and sell goods. Total units sold is a number that is constantly analyzed and worked to be improved, but the profitability of each of those units should actually be a bigger concern. Consider the following example – If your business sells 1,000 units at a profit of $1 each, the company has made $1,000. However, if the business sells just 400 units at a profit of $3 each, the total profit is $1,200. $200 more dollars will have been made by selling 600 less units given a better profit structure. This is obviously a very basic example, but it highlights the importance of efficiency and cost control over mass marketing and purely volume sales.
As a manager, you will usually be expected to understand basic accounting concepts and communicate effectively with financial people in your own organization. You may also be asked to contribute financial data about your own business unit. The basic principles of accounting are best understood by considering some simple businesses and how they might document their financial activities.
