It’s crucial to remember that costs are only part of the equation. If you slash expenses by reducing product quality, you’ll lose customers. If you hire cheaper, less experienced workers, you’ll reduce productivity, leading to fewer possible sales.
Conversely, it’s often the case that increased spending helps realize operational efficiency. Imagine you invested in factory automation that lets you triple your output and triple your sales by extension. If the additional income is greater than your investment, you’ve realized operational efficiency. When considering your expenses, always look at the larger picture and only cut them when the gain will outweigh potential losses.
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