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The big difference between cost reduction and income increase, is that one has a hard limit on possible upside, whereas the other does not. You can reduce your
by avianlyric 5y ago
The big difference between cost reduction and income increase, is that one has a hard limit on possible upside, whereas the other does not. You can reduce your costs by more than your total costs, but it’s quite possible to increase your income by many multiples of your existing income.
Result is that maximising income is generally better than reducing cost. Of course, as with all generalisation, there are situations where this approach doesn’t hold true. But as a high level first order strategy, it’s a good one to adopt.
- wolf550e 5y agoYou meant to write "You cannot reduce your costs"
- ClumsyPilot 5y ago"one has a hard limit on possible upside, whereas the other does not." Thats plain wrong, the gloval market for cars, bicycles and what have you has a limited size. Every large company that's a market leader understands that.
- beiller 5y agoWould capturing 100% of the market granting a monopoly essentially grant unlimited upside? Cause you can just jack the price to absurdity? Also wouldn't reducing cost to zero have an infinite upside as well? Basically zero cost you can produce infinite output. Gettin real pedantic here heh.
- bradknowles 5y agoMy experience has been that each additional multiple of revenue has a certain amount of effort increase that is relatively fixed. Likewise, each additional percentage of cost reduction has an effort cost that is relatively fixed. If you do the math, then increasing your revenue by 2x doesn’t cost 2x the effort. But one additional percentage point of cost reduction might well cost 2x the effort. Sadly, most employers I’ve known do not seem to understand this thing called math.