Often various trends and conditions can signal that profitability problems exist and should be both recognized and rectified.
While such conditions are numerous and can vary by company, here are a few factors that can signal that significant profitability problems either exist or are impending:
- gross margins are (inexplicably) declining
- industry sales are falling faster than anyone anticipated
- price is becoming more of an issue with customers
- opportunities for profitable growth aren’t apparent
- existing product (or service) sales are (continually) less than expected
- new competitors are successfully entering the market
- loss of market share (especially if unexpected)
- company sales lag those of industry peers
- sales decline despite price cuts
- for new products, unforeseen price cuts are needed
Often, these factors can serve as “early warning indicators” if they are recognized quickly. If they are recognized and properly addressed early enough, not only can further problems be avoided, but the resolution of such impending profitability problems may better position the company for increased sales and profitability.
StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and offers corporations and businesses advice, strategies, and actionable methods on how to increase revenue and profitability.