Revenue increases gradually while expenses increase like a step function. This is a key dynamic to understand whether you're the CEO or a team member working in a business.
Every time you ramp up expenses, it cuts into your profitability. This is why ramping up expenses in the right areas is critical.
The right expenses are better framed as investments. They ramp up revenue as well so your profitability curve smoothes out.
Every time you bring a budget proposal to the CEO or board for an expense that doesn't ramp up revenue, the likelihood of getting that budget drops to 0.
They have so many places where they can invest additional dollars that investing it in a place with no ROI has a high opportunity cost as well.
This is why many functions, including marketing, are viewed as cost centers by companies.
Marketing costs look more like expenses than investments when the marketing leader cannot explain how added cost, program or headcount the company will ultimately grow the business in a reasonable time horizon.
Tie your step function to a gradual increase in revenue and your odds of getting additional funding increase dramatically.
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