Profitability, which is reflected in Return on Investment (ROI) and Earnings Before Interest and Tax (EBIT), is the result of careful management of two levels of expenditure in serving the customer:
- Delivering Gross Profit dollars through delivering product and services to a defined plan based on known costs that enable us to match our expected speed/quality/volume matrix. The supply chain needs to working effectively and responsively, our distribution capability needs to meet the customers’ needs and, product and service quality needs match our customers and our own expectations
- Retaining Net Profit dollars after paying all of the non-product/service delivery expenditure as planned, such as our people, premises, information and IT, Sales, General & Administration costs, financing and taxation costs.
This should result in a targeted EBIT that is reflective of the effort and risk that the business owners share and a satisfactory ROI.