Cost Driver Review

What the Heck is a Cost Driver? (And Why It’s the Secret to Real Profitability)

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?” cost driver

The culprit isn’t a villain. It’s a . What the Heck is a Cost Driver

Have you ever looked at your monthly P&L statement and thought, “Revenue is up, so why is our profit margin shrinking?” Then go reduce it

| Industry | Cost | Cost Driver | | :--- | :--- | :--- | | Restaurant | Electricity bill | Number of covers (guests served) | | E-commerce | Shipping fees | Number of boxes shipped OR weight | | Hospital | Nursing staff | Patient days (total nights in beds) | | Law firm | Paralegal time | Number of documents reviewed | | Manufacturing | Machine maintenance | Machine hours run |

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.