The 16 Parts of a Scalable Business
Every business, regardless of industry, operates on the same 16 financial drivers. When one or more are misaligned, growth stalls, margins compress, or cash flow tightens.
Select your business type below to see industry-specific examples for each part
MANUFACTURING
DRIVERS OF REVENUE
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What it is: The volume of potential customers entering your sales pipeline, typically through RFQs, inbound inquiries, referrals, or outbound sales efforts.
Why it matters: Leads are the starting point of revenue. In manufacturing, inconsistent or low-quality leads often result in underutilized capacity, uneven production schedules, and unpredictable cash flow.
How it’s Measured: Typically measured by the number of RFQs received over a given period, along with inbound inquiries or qualified outbound opportunities that move into quoting process. -
What it is: The percentage of leads or RFQs that convert into signed purchase orders or production work.
Why it matters: In manufacturing, a low conversion rate often signals issues in pricing, quote turnaround time, competitiveness, or mis alignment between sales and operations. Improving conversion can drive revenue without increasing marketing or sales spend.
How it’s measured: By tracking the percentage of RFQs submitted by customers that result in approved quotes and issued purchase orders. -
What it is: How often existing customers place repeat orders with your business over a a given period of time.
Why it matters: In manufacturing, higher purchase frequency creates more predictable production schedules, improves capacity planning, and reduces reliance on constant new customer acquisition.
How it’s measured: Typically measured by tracking the average number of orders or production runs per customer over a defined period, such as monthly or annually. -
What it is: The average dollar value of each customer order or production run.
Why it matters: Increasing average transaction value can drive revenue growth without adding new customers. In manufacturing, larger or more comprehensive orders also improve production efficiency and reduce administrative and setup work.
How it’s Measured: Typically measured by dividing total revenue over a period by the number of orders or purchase orders during that same period.
DRIVERS OF profit
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What it is: The direct costs required to produce your products, expressed as a percentage of total revenue
Why it matters: Cost of Goods is the primary driver of gross margin. In manufacturing, even small increases in material costs, labor inefficiencies, or scrap can significantly erode profitability and cash flow.
How it’s Measured: Direct materials, direct labor, and production-related costs divided by total revenue. -
What it is: The ongoing operating costs required to run the business that are not directly tied to individual production jobs.
Why it matters: In manufacturing, overhead is largely fixed. If overhead grows faster than revenue or production volumes, margins compress and the business becomes less resilient during demand fluctuations.
How it’s Measured: Total indirect operating expenses divided by total revenue -
What it is: How often existing customers place repeat orders with your business over a a given period of time.
Why it matters: In manufacturing, higher purchase frequency creates more predictable production schedules, improves capacity planning, and reduces reliance on constant new customer acquisition.
How it’s measured: Typically measured by tracking the average number of orders or production runs per customer over a defined period, such as monthly or annually. -
What it is: The percentage of leads or RFQs that convert into signed purchase orders or production work.
Why it matters: In manufacturing, a low conversion rate often signals issues in pricing, quote turnaround time, competitiveness, or mis alignment between sales and operations. Improving conversion can drive revenue without increasing marketing or sales spend.
How it’s measured: By tracking the percentage of RFQs submitted by customers that result in approved quotes and issued purchase orders. -
What it is: The average dollar value of each customer order or production run.
Why it matters: Increasing average transaction value can drive revenue growth without adding new customers. In manufacturing, larger or more comprehensive orders also improve production efficiency and reduce administrative and setup work.
How it’s Measured: Typically measured by dividing total revenue over a period by the number of orders or purchase orders during that same period.