From the course: Cost Reduction Tips - How To Cut Costs And Maximize Profits
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Comparing cost vs. income
From the course: Cost Reduction Tips - How To Cut Costs And Maximize Profits
Comparing cost vs. income
- Now, when you're thinking about which costs to cut, there is one other ingredient that must be remembered, which is what about the income that it generates? So compare each cost area with the income it generates. So for example, you might have quite a lot of sales people, and you might be thinking we could cut some of those sales people. They're expensive. But actually, maybe they're worth it, and maybe that top paid salesperson, who you resent because he or she earns more than you, is well worth it. They're probably bringing in 10 times their salary. So you always got to look at the value as well. Advertising you can cut. Training is always very tempting to cut. But remember, it might be generating more than it's costing. One would hope it does. It might not, though, so it's really important to do the math. So work out whether it's worth it or not. And I'm going to come back to that later of how do you decide where the sweet spot is on things like that? How much should you spend on…
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