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.
You dig into the expenses. Rent is flat. Salaries are steady. But somewhere, a line item labeled “miscellaneous operating costs” has doubled. cost driver
A is the unit of activity that causes a cost to change. If you don’t know what drives your costs,
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?” You dig into the expenses
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.
The culprit isn’t a villain. It’s a .
What the Heck is a Cost Driver? (And Why It’s the Secret to Real Profitability)