ABOUT THE STRATEGIC PROFIT MODEL
The Strategic Profit Model (also know as the DuPont Model) gives a visual view of an organization's finances and provides the ability to understand and analyze financial performance and return on investment (ROI).
The tool provides visibility to the inter-relationship between the three major categories that contribute to ROI: Margins, Asset Utilization and Capitalization through combinations of debt and equity.
Strategic Profit Model with functional input areas, SPM with functional input areas,
Everything has an impact on ROI and the bottom line. ROI can be improved by:
I use the Strategic Profit Model to compare the financial performance of different companies in the same industry. Insight can be gained into business models used and differences in strategy. I've also used the model to compare operations of the same organization at different points in time. For actual examples with REAL companies, see my LinkedIn profile posts.
When developing plans for major projects such as a new computer system, the Strategic Profit Model has been valuable to evaluate "what if" scenarios.
The Strategic Profit Model can be used as part of training programs to not only show the financial relationships, but how Functional areas and even specific jobs contribute to ROI.
I have extended the concept of Strategic Profit Models to Non-Profits. Yes, that is correct, regardless of the terminology used, non-profits need to earn a profit to support their mission. The non-profit version uses the IRS 990 form for input.
FREE, downloadable versions of the Strategic Profit Model and the SPM for Non-Profits are available on the ONLINE STORE page.
Have questions about the Strategic Profit Model? Send me a note at David.Armstrong@inventorycurve.com
Primary Source: Return on Investment to Wholesaler-Distributors, Richard E. Peterson, National Association of Wholesaler-Distributors, Washington, D.C., 1975.
Looking at inventory performance improvement through a different lens.