Here is a simple economic truth.\u00a0 Fixed overhead continues to eat into your cash month after month.\u00a0 It doesn\u2019t differentiate facile, efficient businesses from slow, disorganized, quality-challenged ones.<\/p>\n
A shocking example of operations affecting cash control<\/strong><\/p>\n If it takes eighteen months to get a new product out the door and into the market, and if a The effect of being slow to market even in tough times<\/strong><\/p>\n And profits from the sale of the product create cash for development of the next product.\u00a0 If the time to market is slowed by inefficient development, the risk of a competitive product overtaking yours increases dramatically.<\/p>\n It\u2019s all about fixed overhead and efficiency<\/strong><\/p>\n [ Email readers, continue here… ]\u00a0<\/em><\/span> \u00a0So, the truth of the statement is self-evident. Because fixed overhead burns cash, extended development cycles burn more cash, preventing earlier sale of product, to create even more cash. \u00a0Efficiency in development pays off in less cost and earlier competitive products, often producing greater market share in the process.<\/p>\n A critical question for you<\/strong><\/p>\n There\u2019s your homework assignment<\/strong><\/p>\n Consider how, and then work on efficiency as a primary tool to reduce cost per unit of output. \u00a0You can also worry over how to make more gross revenue and how to cut costs. \u00a0But you\u2019ll do well to address your company\u2019s efficiency first. \u00a0Time to find a dark room where you can think without distraction.<\/p>\n","protected":false},"excerpt":{"rendered":" And these are indeed strange times, especially if you haven\u2019t lived through 2000-2002 and 2007-2008 recessions and difficulty in finding money from banks and investors. The simple economic truth Here is a simple economic truth.\u00a0 Fixed overhead continues to eat … Continue reading ![\"\"](\"https:\/\/berkonomics.com\/wp-content\/uploads\/2018\/07\/Crisis-2-300x164.jpg\")
product\u2019s gross margin is ten dollars but the corporate overhead is a million a month, it will take the sale of 67,000 more units to break even<\/em> than if it were to take only six months to market.\u00a0 If the total annual potential is 100,000 units, the slower cycle to market just cost the company two thirds of a year in the product\u2019s profits.\u00a0 With today\u2019s rapid obsolescence, that could be the entire life cycle of the product itself, lost because of being slow to market.<\/p>\n![\"\"](\"https:\/\/berkonomics.com\/wp-content\/uploads\/2018\/08\/Strategic-thinking-2.jpg\")
Have you considered how to make your operation more efficient as an important way to increase cash flow?\u00a0 Most of us are quick to worry over cutting costs.\u00a0 Some of us worry over how to greatly increase revenues.\u00a0 Few of us worry over how to squeeze more efficiency out of the development cycle or from the organization itself.<\/p>\n