The Profit category examines the rate at which wealth is being created. Where margins look at percentages, this category examines the actual value of the profit. Because the industry is growing, the profit required to earn 100 points increases each year.
| Year 1 | $6 million |
| Year 2 | $8 million |
| Year 3 | $10 million |
| Year 4 | $12 million |
| Year 5 | $16 million |
| Year 6 | $21 million |
| Year 7 | $27 million |
| Year 8 | $35 million |
For example, if this is Year 1, and your Net Profit is $3 million, you earned $3M/$6M or 50 points. Of course, negative profits earn no points.
You want your profits to be as high as possible. If you are not earning 100 Profit Points, begin your diagnosis by examining your margins.
- If your ROS is above 5%, chances are the problem is rooted in below average Sales.
- If your ROS is below 5%, but your Net Margin Percentage is above 20%, you either experienced some extraordinary "Other" expense like a write-off on plant you sold, or you are paying too much Interest (If TQM is enabled, you may also have spent heavily on TQM initiatives).
- If your Net Margin Percentage is below 20%, but Contribution Margin is above 30%, the problem is heavy expenditures on Depreciation (perhaps you have idle plant) or on SGA (perhaps you are pushing into diminishing returns on your Promo and Sales Budgets).
- If your Contribution Margin is below 30%, the problem can be traced to some combination of Marketing (customers hate your products), Production (your labor and material costs are too high), or Pricing (you cut the price too much).