If you try to manage the cost (salaries) without managing the driver (tickets), you will always be behind.
So, what’s your biggest cost driver this quarter? Go find it. Then go reduce it. Enjoyed this? Share it with a founder who just asked “where did all our cash go?”
Traditional budgets just add 5% to last year’s numbers. Driver-based budgeting asks: “If we increase sales by 20%, how many more customer service calls will that generate?” You can now predict costs before they happen.
If you don’t know what drives your costs, you will under-price your products. For a logistics company, if the cost driver is delivery stops (not miles driven), then a customer with 20 stops in one neighborhood costs way more than one with 1 stop across town. Price accordingly.
Have you ever looked at your monthly P&L statement and thought, “Revenue is up, so why is our profit margin shrinking?”
Want to lower costs? Don’t slash headcount. Reduce the driver. If purchase orders drive your accounting costs, stop creating a PO for every pack of sticky notes. Automate or batch the process.
You dig into the expenses. Rent is flat. Salaries are steady. But somewhere, a line item labeled “miscellaneous operating costs” has doubled.
If you try to manage the cost (salaries) without managing the driver (tickets), you will always be behind.
So, what’s your biggest cost driver this quarter? Go find it. Then go reduce it. Enjoyed this? Share it with a founder who just asked “where did all our cash go?” cost driver
Traditional budgets just add 5% to last year’s numbers. Driver-based budgeting asks: “If we increase sales by 20%, how many more customer service calls will that generate?” You can now predict costs before they happen. If you try to manage the cost (salaries)
If you don’t know what drives your costs, you will under-price your products. For a logistics company, if the cost driver is delivery stops (not miles driven), then a customer with 20 stops in one neighborhood costs way more than one with 1 stop across town. Price accordingly. Then go reduce it
Have you ever looked at your monthly P&L statement and thought, “Revenue is up, so why is our profit margin shrinking?”
Want to lower costs? Don’t slash headcount. Reduce the driver. If purchase orders drive your accounting costs, stop creating a PO for every pack of sticky notes. Automate or batch the process.
You dig into the expenses. Rent is flat. Salaries are steady. But somewhere, a line item labeled “miscellaneous operating costs” has doubled.
