Profitability is an important factor for the long-term success of any business: to stay competitive, profitability must be actively managed and monitored. In a situation with insufficient income, prompt and decisive action is essential as any delays will diminish the options available. When is action needed?
Potential signs of profitability risks include:
- Increasing price pressure from key accounts
- Cost pressure from suppliers or rising market prices for commodities
- Direct competitors are more profitable
- Declining EBIT margin/ROCE over the last few quarters/years
- Covenants (e.g. EBITDA margin) cannot be maintained over the short- or medium-term
- Lack of transparency regarding contribution margins for products/customers/markets
- Discrepancies between estimated and actual costs
- Increased demand for external funding despite significant Capex investment
Benefits
- Deep experience
In the preparation and implementation of bespoke programs to improve your company’s profitability, both during and after a crisis. If required, we also have the necessary expertise on hand to review the company’s strategy.
- Sustainable results
We are aware of the risks of implementation and plan for these in advance when preparing our recommended measures. Our results are well-founded and practicable to implement.
- Expert view
As external consultants, we offer an independent and goal-oriented perspective on the company’s situation that makes it easier to implement these measures. Our analysis can also be used as a basis for the independent evaluation of options and to facilitate transparent and legally secure robust decision-making.
How do you manage identified risks or a downward trend in profitability? How do you identify the right approach in a reliable and systematic way? Why should you consult external experts?
We are able to draw upon a range of tools and methodologies to rapidly make sense of even the most complex challenges.
Our methodology:
- In a workshop alongside the board of directos/management team, we define the targeted level of profitability. Based on many years of experience in corporate restructuring, we define realistic targets together with you.
- We also review the existing strategic goals as part of the initial workshop. Typically, measures that focus solely on cost reduction will not be sufficient. For long term improvement, the market must also be considered.
- We work with management to identify the relevant/critical areas, decide on key areas of focus for analysis, and develop initial hypotheses based on the available data.
- We review your company along its entire value chain so as to further elaborate the points of focus and prioritize these accordingly.
- We continue to collect and analyze any additional data required to derive a robust set of measures. If needed, we can also utilize analysis techniques targeting Big Data and process mining to define robust and measurable targets.
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Based on the targeted level of profitability that was co-defined and the analysis performed by us, you receive robust and practical measures that can be implemented to optimize business performance.
These measures are designed to drive the strategic agenda while also generating improvements to your operating profit: together, these are the key drivers needed to secure the necessary level of profitability over the long term.