Improving Profit: Using Contribution Metrics to Boost the Bottom Line

The Business Wheel

A wheel that operates around a well-maintained hub (Figure D-1), with spokes of even length and at even tension, is far more likely to perform in a balanced state than a wheel with uneven spokes under varying tension that put undue pressure on the hub.

Figure D-1. The Business Wheel with well-balanced spokes. TARI = Target Average Rate Index (Target Average Gross Profit Contribution per unit of Targeted Output Activity¹). Contribution refers to gross profit (or added value) calculated as sales less cost of goods or materials ...