Photo by Josh Appel
If your returns on sales (your earnings) are lower than expected, it’s likely that your costs are higher than budgeted.
Somewhere along the way, margin has leaked.
It can happen for a variety of reasons.
The most common causes are:
- Unforeseen price increases (which are common right now)
- Processes that didn’t go as planned (incurring additional costs)
- Plain old miscalculation.
The second and third causes are more likely when you’re selling or experimenting with something new.
Or if you’re offering a product or service outside your company’s core area of expertise.
When you do that, you’re more likely to incur higher production costs.
And because your workforce may lack the necessary skills, more time and money are spent on refunds and correcting mistakes.
Chasing a bigger, sexier market can be costly if you’re currently geared to operate further down the chain.
It’s better to refine what you do best—your core business—where returns are healthier.
Ideas like these are within the Revenue Protection Issue of the Quietly Good Newsletter.
So is “dog fooding,” though the newsletter uses a different term.
If you’d like to know what that means, check out this post.