John Miller, CAPP Program Manager
Automotive manufacturers have perfected the use of a low-cost “base model” while enticing customers to spend more for desirable additional features and upgrades.
Construction business enterprises generally adopt a profit model based on product costs plus a pre-determined profit margin. While more complex mathematical equations exist to account for fixed and variable business costs, a very basic formula is that Profit equals a company’s Sales minus Costs.
Creating an effective Business Profit Model is not complicated, but requires walking through several fundamental steps to identify a business’ target market, establish the essential activities related to conducting the business, recognize the specific resources needed, develop the company’s value proposition(s), determine key partners and support services, and uncover methods of creating customer demand. The final step in this process is making a commitment to periodically review, revise and innovate as needed, while moving forward with the overall Profit Model.
Overview of the elements and steps involved in developing a Business Profit Model, courtesy of John Miller.
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