This.
I've have seen dozens of high revenue, high profit variable business models closed because the cost (a % of revenue) exceeded some arbitrary budget amount due to its growth / success and the exec compensation was partially based upon keeping within budgets ->
I've have seen dozens of high revenue, high profit variable business models closed because the cost (a % of revenue) exceeded some arbitrary budget amount due to its growth / success and the exec compensation was partially based upon keeping within budgets ->
A quick back of the envelope calculation. Over last fifteen years, I've seen about $20 bn of high margin revenue thrown away by companies because the cost exceeded some arbitrary budget amount and the budgetting procedure was inflexible. I do wonder if anyone has studied this?
This isn't opportunity or investment ... this is literally ... "we're making money, we're pofitable, it's growing huge ... oh wait, we've sold so many units our cost has exceeded $x ... shut the project down, stop making money!"
Of course, that's over 15 yrs and given the projects were switched off then any future revenue is hypothetical ... but the act of switching off profitable revenue is what I find bizarre.
X : Companies don't switch off profitable revenue.
Me : Oh, you'd be surprised. Lots of bizarre behaviours exist in corporate land, many of which are caused by remuneration / executive compensation schemes.
Me : Oh, you'd be surprised. Lots of bizarre behaviours exist in corporate land, many of which are caused by remuneration / executive compensation schemes.
