5.15.80: THE ELITE 5% - MAXIMIZING PROFIT BY REDUCING VARIABLE COSTS - WILLIAM EASTMAN
PROFIT RADIO - "A Network of Entrepreneurs for Entrepreneurs"
We introduced the 5.15.80 Model at the beginning of the Season. It was a combination of research into small business performance and our practical experience from the last 2 decades. You could go to any area around the global with a market based economy and randomly select 1,000 companies, here is the distribution you would find: 5% or 50 companies that own their markets, 15% or 150 companies that are making money, and 80% or 800 companies that are barely surviving.
This series is about how to move from one level up and our concern in this series is the 5%, not how you get here which which is covered in the 15% series; the focus now is how to SUSTAIN market leadership.
LISTEN > ENGAGE > APPLY
Today we finish 7 of the 9 Disciplines of Market Domination. These are the intermittent disciplines that will move a successful business to a market dominator.
Disciple 7 is the second of two attacks on cost - variable.
Variable costs are a company's costs that are associated with the number of goods or services it produces. A company's variable costs increase and decrease with its production volume. When production volume goes up, the variable costs will increase. On the other hand, if the volume goes down, so too will the variable costs.
Key Issues - Owner Perspective:
What You Need to Know
Principles of Lowest Cost Producer (LCP)
Fixed Costs & Variable Costs
What You Need to Do
Apply ABC (Activity Based Costing) to all Functions:
Determine current capacity – is it at or close to 90% of what is possible:
Next Week - Discipline 8 of 5.15.80: Owning the Future Competitive Advantage
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