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Tom Stankovich is CFO of medtech company ReShape Lifesciences, headquartered in San Clemente, CA, which manufactures the Lap-Band device used in bariatric surgery.
This interview has been lightly edited for length and clarity.
What’s one KPI you pay a lot of attention to?
One of the more important KPIs is gross profit margin. It’s important because whatever is left over allows you to invest in other areas of the company, like sales, marketing, or R&D. It’s something I focus on and maximize however I can.
How often do you calculate your gross profit margin?
We calculate it every month. I tend to analyze it on a quarterly basis. But if I need it in any given month, I can pull the data.
What’s a number that you strive for?
It depends on the industry. Sales volume really has an effect. We have a pretty solid gross profit margin that’s right around 60% based on the current sales levels that we have. We’ve been as high as 70%.
What are steps you take to improve your gross profit margin?
To optimize it, you have to look at both your fixed costs and your variable costs. We can look at a number of things, [such as] increasing the volume of sales by working with our sales and marketing teams to promote the product more heavily. Sales price increases obviously have a positive effect, but you have to be strategically careful with that, because nobody likes to pay more for anything. But we live in an inflationary environment right now, so our costs are higher.
What are some of your variable costs for the Lap-Band?
Raw material pricing would be a variable cost for us, although that can be fixed for a period of time. A lot of it depends on order quantities as well. If we could get a better price from a raw material standpoint by ordering more, we would lower our cost and, over time, increase our margins.
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