Replace Dollar Targets with Margin-Based Goals
from The 12-Week MBA: Learn the Skills You Need to Lead in Business Today by Bjorn Billhardt
How to Apply This
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Analyze margins for each activity or product. For every major project, find (or estimate) your margins—what percentage of revenue is left after variable (and then all) costs.
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Use break-even analysis before launching new initiatives. Calculate how many units or customers you need for a new effort to begin turning a profit. Test whether this is realistic with your current resources.
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Compare margins over time and against peers. Rather than just looking at profit dollars, track margin changes quarter-to-quarter, and ask others in your field what typical margins look like.
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Reframe decisions using trade-off language. Instead of 'Should we increase sales?', ask 'Will increasing sales at this margin rate actually improve our sustainability and reduce risk?'
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