Customer portfolio management is essential for ensuring strategic decisions that maximize your business’s profitability. Many companies still associate customer success with generated revenue, but this view can obscure critical improvement opportunities. After all, customers with high purchase volumes may be less profitable when the costs associated with serving them are analyzed.
A detailed analysis of service costs reveals that not all customers contribute positively to the company’s financial health. According to studies from Harvard Business Review, the distribution of customer profitability is as follows:
Identifying which customers demand more effort and resources enables more precise decisions regarding pricing and discounts. Companies that neglect this cost evaluation often face distortions. This happens because fixed costs are poorly distributed among the remaining customers, which can turn neutral customers into unprofitable ones.
It might seem like the best solution is to “fire” an unprofitable customer. However, without proper cost evaluation, the company could face an unexpected impact: fixed costs, previously allocated across all customers, would now be redistributed among the remaining ones. As a result, customers that were once neutral or profitable may begin generating losses, shifting the problem rather than solving it and harming profitability further.
Solutions such as our profitability calculator can help you identify each customer’s true situation and make more confident decisions.
Effective customer portfolio management is a key step in improving business results. It provides valuable insights into which customers to prioritize and which need specific strategies to become profitable. One efficient method for this analysis is activity-based costing (ABC), which allows costs from sales, marketing, and logistics to be directly assigned to the customers consuming them.
With this approach, decisions such as adjusting contracts, redefining discount policies, and even discontinuing unprofitable relationships (while understanding how this decision impacts the company’s finances) become more strategic. This ensures the organization maintains a balance between profitable customers and those that can be optimized, driving sustainable growth.
Investing in customer portfolio management is a way to transform how you view your business. By focusing more clearly on the 20% to 30% of highly profitable customers and employing specific strategies for others, you can enhance profitability and reduce inefficient costs.
Want to better understand how to improve customer management and boost your results? Fill out the form below and discover how we can help your company grow smarter and more profitably.
If you want to keep your business on the right track, you must stay alert to the traps that can be fatal. Here are 10 foolproof tips to drive your business to bankruptcy—and how cost management can be the key to avoiding these mistakes and ensuring your company’s survival.
If you’re in manufacturing, focus solely on products; if you’re a service organization, focus exclusively on services. Channels and customers are just consequences, and measuring the cost of serving them is an unnecessary luxury.
Many business owners believe that focusing exclusively on products or services means managing their company efficiently. However, this mindset is a major mistake. Cost management also involves controlling how these products and services impact the company’s overall expenses. Effective cost management integrates all aspects of the business, including channels and customers.
These are costs you’d have anyway, so why bother with back-office expenses or indirect costs generated by operations?
Ignoring indirect operational costs may seem like a practical solution, but it’s one of the surest ways to drive your business to failure. Effective cost management must account for all costs, including overhead, and identify where waste occurs.
Buy low, sell high, and pray. Who needs strategy when you’ve got faith?
If you think gross margin is the only important metric, your business might be in danger. Focusing solely on sales while ignoring cost management can lead to misleading results. Proper cost management considers the total cost of production and operations—not just sales.
Maximize cost allocation through spreads, especially based on revenue or volume. After all, if it works to split a bar tab, why wouldn’t it work for an entire company?
Using spreads as a cost allocation method is a quick way to generate significant errors. Cost management should rely on more precise methods, such as ABC costing, analyzing activities that truly impact production and services, ensuring accurate cost distribution across the business.
Need more detail? Add another cost center to accounting. KPIs? Waste of time. Focus on selling more, and if costs become an issue, start laying off employees.
Overlooking process and activity management can be a fatal error. Effective cost management requires analyzing the profitability of each process and activity to ensure efficient allocation of capital.
Moreover, layoffs are not a sustainable cost-reduction strategy.
Cost management is just another IT project. Modeling is a minor detail, and all business rules will be defined by the Systems team.
Relying solely on an ERP for cost management is a mistake. Implementing a cost management system requires customization and cannot be entirely delegated to general management software, which often lacks specific functionality to properly track and allocate costs.
Every company has redundant activities, “inevitable rework,” or processes that “have always worked.” Why change something that’s not broken?
Failing to address duplicate tasks and ineffective processes is one of the biggest traps for a business. Cost management must critically assess and eliminate processes that create waste while focusing on those that bring real value.
Don’t create a communication plan. It’s best to keep the cost model hidden in Controllership and surprise everyone with unexpected charges.
Hiding cost models can lead to negative surprises, especially when costs spiral out of control. Good cost management practices include proper planning and transparent communication between departments, with a more strategic approach following the FP&A model.
The more detailed the cost model, the better! Tracking millions of activities seems like a great idea: you can always consolidate them later. Precision is key, even if it’s overkill.
While accuracy is essential, excessive detail can shift the focus away from what truly matters. Cost management should strike a balance, avoiding unnecessary complexity.
All that matters is being price-competitive and selling in volume. Whether you make a profit or not is just a minor detail. If the budget gets tight (and it will!), go for another round of funding or consider selling a unit, a product line, or even part of the business.
Growing without considering costs is a critical mistake. Cost management must align with pricing and volume strategies to ensure long-term profitability and protect the company’s financial health.
Don’t let your company fall into these traps! Fill out the form below to talk to one of our specialists and learn how to implement effective cost management to ensure your business’s financial health.
Management in the education sector aims to identify and plan a set of strategies and actions with the purpose of achieving the objectives of the educational institution by using the resources available in the best possible way.
In general, the management in this sector focuses on educational methodologies and practices, using different tools, techniques, and intellectual capital to lead and guide the teams during the execution of the project. For example, the development of the stages is monitored in order to identify the necessary adjustments, ensuring the quality and fulfillment of the activities.
Based on this context, we’ve prepared this post for you to learn about the best management practices in the education sector and put them into practice. Keep reading the article to know more about this topic!
The first step in any management strategy is to start with structuring the project’s plan. Preferably, create a document, for everyone involved, containing guidance on the actions of the school year in question, such as:
The purpose is for managers to make the decision-making process easier. Keep in mind that this planning should undergo a periodic review so that the necessary adjustments and updates of the institution’s demands are carried out.
Promoting a good management in the education sector is a task that can only be carried out assertively if the institution has very well-defined goals. The determination of objectives serves as a parameter for the pedagogical teams and other employees involved, having all the reasons to improve the teaching.
Set goals related to student performance and monitor them to measure aspects such as the student dropout and retention rates and the qualification of teachers. That way, managers will have all the data needed to develop strategies aimed at achieving better results.
Clear and transparent communication between the personnel that make up the educational institution’s team of collaborators is essential for the management in the education sector.
The faculty and other professionals who are part of the daily lives of students should have full knowledge of the goals and objectives to be achieved. Furthermore, feedback exchange between the team is important, so that everyone knows which points they are getting right and which ones they need to improve on.
The use of technology in the education sector has proven to be a real ally, in and out of the classroom. This is due to the advances made by the digital transformation process.
Given the context, to invest in management technology in the education sector is to bring the benefits of automation to the school. In addition to automating manual and repetitive tasks, the teaching team is able to dedicate more time to teaching methodologies, just as managers are allowed to focus on strategic issues.
In conclusion, it is worth mentioning that, in order to optimize the management in the education sector using technology, it is very important to choose a software provider with credibility and knowledge about the area.
Do you want to know more about the MyABCM solutions for mapping costs using technology in your company? Then contact our team so that we can show you the very best in digital innovation for your business!
Carrying out a good cost management is not always a simple task for managers. (more…)
Have you thought about all the information you receive daily? It is probably virtually impossible to measure. (more…)
Some sectors of the economy, especially those related to health care, such as hospitals, need to operate full time in order to meet the needs of the population. (more…)
Optimizing your company’s financial management is the right move to make in order to compete in your sector. (more…)
The sustainable growth of any business is inextricably linked to good management practices that are able to provide managers with all relevant information of the business (more…)
The volume of information and data that a company generates daily is enormous. This led the technology market to develop systems capable of centralizing information from different departments and integrating them (more…)
The technological advance of the last decade has transformed the market, which started to behave in a much more dynamic way. (more…)
