What Is a Target-Benefit Plan?

The target profit is the profit that the enterprise wants to achieve within a certain period of time. Planned profit, optimal profit, advanced profit level in the same industry, historical profit level of the company, etc., can be used as target profit. The determination of target profits will help mobilize enterprises and employees to work hard to further improve economic efficiency. To determine the target profit, we must proceed from the actual conditions, fully tap the potential of all aspects, and properly leave room for being neither conservative nor blindly advancing. ^[1]

Target profit

Right!

The target profit is the profit that the enterprise wants to achieve within a certain period of time. Planned profit, optimal profit, advanced profit level in the same industry, historical profit level of the company, etc., can be used as target profit. The determination of target profits will help mobilize enterprises and employees to work hard to further improve economic efficiency. To determine the target profit, we must proceed from the actual conditions, fully tap the potential of all aspects, and properly leave room for being neither conservative nor blindly advancing. ^[1]

Target profit refers to the optimal control target that an enterprise should achieve through hard work in the future, and it is one of the important strategic goals that an enterprise must consider in its future operations.

The target profit is the profit target expected to be achieved by the project operation. It is determined after sufficient market investigation and repeated calculation and balance after a comprehensive analysis of the project development income and cost factors according to the specific conditions of the proposed investment project. Once the target profit is determined, it will become the basis of action for the company's production and operation activities. The enterprise should organize sales revenue and control based on the target profit.

The needs of the company's continuing operations;

the need for capital preservation;

The requirements of internal and external environment adaptation.

(3) Planning process for target profit

Investigate the implementation of the profit plan in the previous period and analyze the factors that affect profit changes in the next period;

determine the preliminary profit target;

Through comprehensive balance, the target profit is finally determined.

After the target profit is determined, according to the requirements of the target profit, determine the various revenue and expenditure indicators to complete the target profit, and make a profit plan to organize the realization of the target profit; Strengthen the evaluation and analysis of the target profit.

Determine the target profit is to implement the target profit-oriented enterprise

It should be noted that reducing costs and expenses is a regular task of enterprise management, and the realization of target profits is not simply the implementation of sales budgets and production budgets. Management improvements can make enterprises

There are four main methods for determining the target profit. Enterprises should choose a method that is suitable for the business environment according to their own characteristics:

Volume-benefit analysis

Quantitative cost-benefit analysis is a method to predict the target profit by using the laws of change in product sales, sales, fixed costs, variable costs, and profits. The method of applying volume-to-benefit analysis should be based on the full investigation and research of the market. Through the market analysis, first make a scientific forecast of the sales volume or sales of the product, and then analyze and predict the fixed and variable costs of the enterprise. , Contributing gross profit margin, etc., and finally determining the target profit.

Correlation ratio method

The ratios related to the target profit mainly include the sales profit rate, cost profit rate, operating leverage ratio and net capital interest rate. The manager can first analyze these ratios based on analysis and determine the target profit based on the forecast.

Simple profit growth ratio measurement algorithm

The profit growth rate measurement algorithm is also a common method for companies to determine target profits. It is mainly applicable to stable development enterprises. Use this method to determine the target profit, that is, according to the best profit level in the company's history, the profit level reached in the previous year, and the trend and magnitude of the profit growth rate in the past several consecutive years, especially in the past two years. To determine the expected profit growth rate, and then measure the target profit.

Benchmarking

Benchmarking is based on the strongest competitive company or the leading and most prestigious company in the industry as the benchmark. It quantitatively evaluates and compares the actual situation of the company's products, services and management measures with the benchmark, and analyzes the benchmark company. The reason why the performance of the company reaches an excellent level is based on the selection of an improved optimal strategy and iteratively repeated in the enterprise to improve and improve the performance of the enterprise. It is a management method that has a wide range of applications. Positioning, whole process, and multi-level benchmarking management can also be used to benchmark a certain economic activity of an enterprise.

Once the target profit is determined, it must be relatively stable. The situation of revising the target profit does not occur frequently. Only new problems have occurred in the implementation process, and new unexpected situations have been encountered, such as adjustments in national economic policies and changes in the market environment. , The impact of major disasters, etc., and these new problems and conditions have a greater degree of impact on the target profit, which makes the target profit unreasonable, and then the target profit is revised to maintain the advancement and rationality of the target profit. The revision of the target profit is related to the overall situation of the enterprise and must be revised in strict accordance with the procedures. The procedure for target profit revision is basically the same as that for budgeting. In short, instead of encountering outstanding problems and special situations, corporate managers try not to modify the target profit.