Profit Velocity Solutions is a boutique strategic advisory serving complex industrial manufacturers with broad customer and product portfolios. Leveraging our proprietary technology platform, Profit Velocity’s experts collaborate with management teams to achieve breakthroughs in revenue and profit performance.
Though not widely understood, the common characteristic undermining the financial performance of manufacturing firms in industries as diverse as specialty chemicals, textiles, paper, packaging, electronic components, pharmaceuticals, food processing, metal, rubber, and plastic parts, building products, and metals processing is massive “complexity”—the need to serve many different customers with thousands of distinct product varieties from an array of capital-intensive facilities. The greater the variety of customers, products, and assets in such manufacturing businesses, the greater the hidden revenue and profit upside that Profit Velocity can help management identify and capture for investors.
Maximizing the revenue, profit, and competitive position of extraordinarily complex businesses is simply beyond the limits of traditional “profit per unit” analytical tools and methods. Only by leveraging a “profit per time,” or Profit Velocity, approach can such highly complex businesses realize their full potential for investors. For over a decade, Profit Velocity has used its unique time-based tools and methods to help ownership teams, management teams, and consulting partners unlock the revenue and profit potential previously obscured by too much data and too little insight into the fundamental economics of their complex manufacturing businesses.
Traditional profit analytics measure in great detail the profit margin each product unit yields. Taking this fundamental business metric a crucial step further, Profit Velocity also takes into consideration how fast each unit physically flows through key production assets to calculate the “profit per time,” or Profit Velocity, generated by those assets when making that item.
From an investor’s perspective, what matters most is how fast an asset makes money. Return on Investment always has been and always will be measured per period of time. While the profit margin per unit metric is vitally important, it is not the metric investors want to maximize.
Yet until now, given data challenges and the lack of effective tools, particularly in highly complex manufacturing businesses with bewildering arrays of customers, products, and assets, it has been impossible for management teams to precisely quantify how fast each order, customer, product, or asset produces money. Without access to up-to-date and precise metrics on profit per time, managers have had no alternative but to rely on the most detailed profitability figures their conventional systems can provide, “profit margin per unit,” when setting plans, priorities, policies, and prices.
For complex manufacturers, the unintended consequence of relying on the accountant’s metric of “profit per unit” rather than the investor’s metric of “profit per time” is to consistently bias management’s choices in ways that substantially slow the flow of revenue and EBITDA dollars. Ironically, executives and managers who vigorously pursue margin goals are misled into making day-in, day-out choices that actually reduce the revenue and EBITDA results they could readily achieve from the assets if they had access to “profit per time” insights. By relentlessly striving for higher margin goals, they inadvertently sacrifice total EBITDA dollars generated by the enterprise each month.
Our work with clients across a broad spectrum of complex manufacturing industries has demonstrated that the same customer and product portfolios, cost structure, and assets can yield at least 5% more revenue—with much of that incremental revenue falling to the bottom line—once management starts basing its decisions on the metric that their investors actually need—profit per time.
For private equity investors determined to achieve far higher levels of operating performance that will in turn yield dramatic gains in exit values, Profit Velocity’s breakthrough approach offers unprecedented opportunities to accelerate the revenue and EBITDA flowing from complex manufacturing investments.
While simple in concept, actually putting the Profit Velocity metric into practice that “moves the needle” on both the top line and the bottom line requires expertise and technology. Thanks to our proprietary information platform, our consultants are able to quickly analyze and make pragmatic recommendations to even the most complex manufacturers. Steadily developed from over a decade of collaborating with clients, our unique time-based analysis and planning platform allows our consultants to convert a manufacturer’s commonly available transaction data into powerful new insights in a matter of weeks.
Designed to deliver actionable new insights to our clients in the shortest time with the least effort and simplest data requirements, Profit Velocity’s information platform goes well beyond the analysis of historical performance. Our enterprise-scale “what-if” planning simulation capabilities allow our consultants to work with management teams to quantify the revenue and profit potential of realistic business scenarios. Tying it all together, our patented “PV Control Panel” provides remarkably deep insight as to why potential decisions will or will not make money faster.