Welcome to the Product Profit and Risk blog!
First things first: what is the purpose of the blog? Well, hopefully, the title is fairly descriptive (although, maybe not catchy?). Maybe we’ll have a renaming contest later if the name is not compelling…
At the end of the day, we believe most ventures in life, including business, have the goal of generating the most reward with the least risk. In the case of product & manufacturing companies, we are going to define “reward” from the standpoint of the business as Profit. (for now we are not going to worry about the canonical definition of profit as EBIT, EBITDA, Net Profit… or even Free Cash Flow). On the other hand, there is risk in undertaking any venture for profit. That’s even harder to define. Is it the dollars you could lose, the hair you could lose, the family you could lose, and/or the reputation that you could lose (or the life you could lose, like the guy in the picture above)?
For product companies, anywhere from 50-90% of their Revenue goes to COGS (cost of goods sold). COGS (~=Product Cost) is the largest expense on these companies’ income statements, and we believe the single most powerful driver of Profit… and reducing the risk of poor financial performance.
We plan to talk about those things that directly affect Product Cost (ergo product profit), such as:
- Raw Material Cost
- Labor & Direct Overheads
- Capital Part Tooling
- Sourcing & Supply Chain
If these are the problems, what are the solutions? We’ll talk about that tomorrow. Welcome, and thanks for joining us on the ride.
Your friendly moderator,
Eric Arno Hiller
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