CFO Network traces its roots to working for some of the world’s most admired, most advanced manufacturing companies.
Keys to success are capacity planning and utilization, fixed asset management, pricing, unit economics and labor productivity.
Net margins depend on industry, but typically range between 4-9%. The key is to understand your cost structure. Most manufacturers have a high fixed cost structure. The name of the game here is pricing to maximize total marginal profit which usually involves getting maximum utilization of the fixed assets. If you have a product that is more commodity, you need to focus on being a low cost producer. If the pricing environment is volatile or uncertain, you need to focus on a more variable cost structure. If you have opportunities to create differentiation in the marketplace and have pricing power, you can maximize profits through a fixed asset-heavy strategy.
Solid business planning is absolutely critical for success in a manufacturing company. Marketing must work closely with production when making product feature and pricing decisions. Marketing must have a clear understanding of market sizing, pricing and volume impacts so production can optimize its asset profile to maximize profits. Misalignments can result in either poor capacity utilization or inability to meet demand. Either of these can be disastrous.
CFO Network has deep experience with business planning. We have made a good living for more than a quarter century working with both marketing and production to maximize profits.
For example, we can work with marketing to develop a solid market model. We have perfected world class techniques and are prepared to bring these capabilities to bear for our clients. We can help your organization answer key questions such as:
What is the total available market for our product?
Given our marketing strategy, how do we segment the market and how are we going to address each segment?
Given our product set, price and features, how do we compare to our competitors? How are we going to win? How will we penetrate and gain market share? What does this mean in terms of volume elasticity?
All of these are critical questions, not only for marketing, but also production. They have to know how much of what to build and when. At Intel, we had to spend $2 billion on a new factory to produce products that hadn’t even been invented yet. But we had to know and manage all of it so that at the end of the day we met profit expectations.
This is just one example of how CFO works with our clients to become a critical strategic partner. We deliver much more than you’d expect from a typical bookkeeper, accountant or even Chief Financial Officer. We specialize in understanding what truly drives profitability for your business. We take it upon ourselves to go find that data in whatever systems they reside. We analyze it to be in position to make recommendations that have real impact. We work with you to learn how you like to see the information, help you understand it, and the best way to act upon it.
Contact us today for a free consultation. We would love to talk to you about how to affordably get your business to where you know it can be. We can help you get there.