Revenue is up, profit isn't: managing costs

How does cost management help protect profit while revenue grows? By answering basic «what if…?» questions.

• —If we sell twice as much — we'll also need to deliver twice as much.
• —If we take more orders at once — they all have to be processed somehow.
• —If the offline team grows — sitting on top of each other is uncomfortable, and moving to an office will cost a pretty penny.

Ask these questions in advance, and decision-making turns into solving school-level equations. And what if you've already noticed that revenue is growing but profit isn't? It's a typical problem for many projects, especially during expansion.

Fixed costs

Don't depend on the volume of goods or services: rent, fixed salaries, monthly equipment maintenance. Their optimization is the most calculable — renegotiate contracts and look for better terms.

Variable costs

Depend directly on the volume of activity: raw materials, hourly staff pay, commissions, packaging and delivery. These are what «eat» the extra revenue as you grow, if you don't keep an eye on them.

Splitting costs into these two groups shows you which part of your growth actually brings money and which brings only turnover. That's the first step towards profit growing together with revenue rather than lagging behind it.