The R-P Effect is a Gross Profit Methodology created by Cynthia Rhodes owner of Rhodes Porter, a Business Development Logistics Management company. The R-P Effect is used as a tool to align both the written narrative and the financial numbers of a business plan.
The R-P Effect equation is defined as Revenue minus Process equals Profit (Gross). Based on the basic Profit and Loss financial statement, the equation allows the business owner to assess the drivers of revenue sales assumptions, take the mental focus away from unnecessary expense spending requests towards defining expenses necessary for the process of creating and delivering the product or service (Cost of Goods Sold).
WORKING ON YOUR BUSINESS NOT IN YOUR BUSINESS
This is the phrase often used to change the mindset of entrepreneurs to apply more efforts towards Revenue growth, improvements, pivots and innovations of the business and leave the process of production of the product and service with the workers it employs.
Working on your business is the revenue and in your business is the processes within the profit formula which again removes the focus on mere sales assumptions and spending that does not directly impact production. Using the R-P Effect develops beneficial pathways for realistic funding requests for new entrepreneurs, founders, and start-ups.
Rhodes Porter associates are ready to discuss how to implement and execute the R-P Effect formula into your business strategy