In business, the word "profitability" often connotes success. The more profitable a company is, the more successful it is. Or so the thinking goes. Certainly companies do not normally continue to exist over extended periods if they are unprofitable. But is it that simple? Can the bottom line alone determine whether a company is thriving?

Financial statements are designed to report a company's profit based on past events or conditions. One dimension of profitability, therefore, is that it has to do with the past. However, past results are no assurance that future results will be as good or better. Past profits are like trophies. They commemorate what you accomplished. But, as any superior athlete will tell you, it is always your performance in the next match or the next season, not trophies, that determines whether you remain in the winner's circle.

The same holds true in the competitive business arena. Successful companies focus continual efforts on ensuring their company's future profitability, which can be affected by customer satisfaction, revenue growth rates, operating margins, pricing elasticity, human resource development, the results realized from capital investment in assets or know-how, and other factors.

Having a well-developed Value Growth Process, business resource allocation plan and financial forecasting system are quite important to help gauge expectations of future profitability. Source can help you develop such a forecasting system. And more. Because knowing what your company is capable of accomplishing doesn't mean it automatically will. Forecast financial results are oftentimes negatively affected by a number of non-financial actions and organizational decisions. Value growth barriers can hinder your company from achieving anticipated results. Our Value Driver Analysis (VDA)™ helps you to identify and eliminate these profit-eroding risk factors found both within and outside of your organization.

For more information on increasing your company's profitability click here.