What are profit drivers?

Profit drivers are determinants that have a significant impact on a business’s bottom line. They are often categorised as financial and non-financial drivers.

Financial profit drivers are directly connected with dollar figures and are most commonly considered in relation to profit. Examples of financial profit drivers include:

• price

• fixed and variable costs

• sales volume

• inventory

• cost of debt

Non-financial profit drivers also impact a business’s bottom line, even though they’re not expressed in dollar terms. Client satisfaction and bad weather are two examples of non-financial profit drivers that can have an impact on sales and an increase or decrease profit. Non-financial profit drivers include:

• productivity

• client satisfaction

• quality of a product or service

• training of employees

• employee satisfaction

• business culture and values

• product and process innovation

• market share

• employee safety

Businesses should keep track of their profit drivers and their relative importance. Working out why they’re important to the success of a business and regularly measuring their impact can help owners evaluate the success of a business’s strategies.