How to make sure the product is achieving its financial goals ?
- Build up a basic understanding of balance sheets, income statement and cash flow statements.
- Once you understand the above, use Variance Analysis technique to evaluate if product is achieving its goals
- Variance analysis looks at a financial plan or budget and compares that plan to the actual results as shown on the product’s Profit and Loss statement
- Variance information is a starting point for the product manager, usually with the help of a financial specialist, to analyze what has taken place, why, and what kind of remedial action might be needed.
- The key in this kind of product level financial analkysis is to determine the relationships between unit volunes, costs and product profitability
- Every line item in the product Profit and Loss provides a glimpse into the business performance of the product.
- All variances either positive or negative, must be explained.
- Each explanation should have some kind of action plan to remedy and deficiencies.
- Example of variance analysis can be applied to all financial metrics, examples below:
Income statement variance tracking
Profit and Loss Variance Tracking
- Above variance technique can be applied to tracking any other financial ratio or performance metric that might be of value to a product’s overall expected performance.
To be able to track the variances from the planned and forecast-ed tracks and what needs to be done to fix the variations or if needed readjust the forecast-ed path.
Source: Haines, S. (n.d.). The Product Manager’s Desk Reference.