The Profit Model is how your company captures value from providing valuable services and products to your customers.

Therefore you need to be clear about your Customer Value Proposition (CVP) and ensure it is current and fit for purpose before addressing any Profit Model issues.

Designing the Profit Model needs an iterative approach by identifying and testing assumptions that accrue from the CVP process.

The Profit Model consists of 4 main components that need to be checked:

• Revenue (price x volume)

• Cost structure (both direct and overhead)

• Target unit margin

• Resource velocity (inventory turns for example)

These components need to be able to deliver the bottom line growth that the company wants to achieve.

We will ensure that all 4 are fit for purpose and capable of delivering at the right level.

Defining a workable Profit Model will have implications on Capabilities needed or not needed and business processes that deliver those capabilities.