Profitability framework
When profit moves, it is always revenue, cost, or both. Here is how to pull them apart and find which one is really behind it.
The setup
What a typical prompt looks like
Int
Interviewer“Profits at this business have fallen 20% over the last year. Find out why.”
You
Your moveBefore touching a number, ask five questions to understand the problem.
Question 1 of 5
How long has this been going on, and how big is the drop?
1
Question 2 of 5
Where does the client operate, geographically?
2
Question 3 of 5
Where does the client sit in the value chain?
3
Question 4 of 5
Is this specific to the company, or is the whole industry feeling it?
4
Question 5 of 5
Does it cut across every store, region, product line and customer, or only some?
5
01 The big picture
It always comes down to revenue, cost, or both
Split profit into its two levers first. Then work out which one is actually behind the move.
Profit
Profit
Revenue
Cost
The full tree
Everything in one view
Tap any box to light up its path and see what to check there.
Pick a box above to see what it covers.
Where to next