Improving performance

If we can increase profits without increasing resources in business, or perhaps reducing their volume, then it is the best way to ensure a healthy growth of society. It's easy to say, but worse done. Let's look at the table below. Here we can simulate different variations and their impact on the resulting profit.

For example, if we increase sales by 10 000 € while maintaining a profit margin on 10.80%, then our profit increased by 1 080 €. So, both the profit and sales grew by 14.3%. If we achieved this without the need to enlarge the production space and without increasing the resources in stock, absolutely great! Our return on capital will also improve.


The opposite and unhealthy case of the above scenario – the increase in sales, is a situation where more assets are added to the business to achieve the same result, and the costs grow disproportionately. Here it is important to be careful, because this scenario can no longer be considered healthy.

So how can identify the areas reducing the financial performance of our business?

There are many ways to do it. Probably the most promising area is the price setting, the area of costs and capital spent in everyday activities.