Given the number of times we’ve had clients ask for help evaluating their product or service mix this past year, I figured it was time for a bit more of a technical discussion. So get that fresh cup of coffee and use this entry to begin to ponder how your products or services help — or hurt — your business.

Knowing the profitability of each individual product/service you provide can help you make decisions to improve your bottom line. You may want to discontinue products and services that aren’t particularly profitable while promoting the ones that improve your overall results.

One basic method of looking at profitability is called cost-volume-profit analysis (CVP).  At its core CVP relies on the separation of fixed and variable costs to determine the break even point of a product (or service) and how much it contributes to profit after reaching this point. Read More→