"You can see a lot just by observing." - Yogi Berra

We agree completely, which is why performing what we call a Backtest is so important: it is the bridge between the old and the new. And along the way, building it will provide vital information about each of your customers.

A backtest is conducted by re-estimating a broad, representative sample of the business booked by the company over the previous six months using the newly constructed MHRs and data from the Profit Plan. The booked selling price is then compared to the estimate's out-of-pocket cost, and the resulting Contribution is logged and analyzed.

This information provides the link between the old pricing system and the new management tools afforded by Profit Planning.

The backtest enables us to quantify the quality of every order booked. Not only will we be able to calculate the amount of money above out-of-pocket available to cover fixed expenses, we will have, for each order taken, the rate that contribution accumulates. For example, if a job has a Contribution Factor of .356, we know that for every dollar of revenue, over thirty-five cents is available to contribute toward fixed expenses. If the Profit Plan calls for an overall target of .310 for the company to make 10% profit, we can say with certainty that this is a great order.

For a sample of one of the many reports generated from backtesting, please see the Deliverables link.