Source: When is a Dollar not a Dollar?
An exploration of how the business value of a dollar varies depending on the context.
- Money has different marginal value to a customer depending on where it falls on their balance sheet.
- Some types of revenue require a lot more effort and resources to earn than other types.
- Timing matters, and a dollar today is worth more than a dollar next year.
- Cost vs. Revenue
- The Principal-Agent Problem
- Existing Expense vs. New Expense
Companies and teams often have existing budgets for common expenses.
- Above vs. Below Discretionary Spending Limits
- Selling Services vs. Customized Products vs Off-the-shelf Products
Different types of revenue have very different scaling characteristics.
- Selling to Many Stakeholders vs. One Stakeholder
Products with many stakeholders are hard to sell because you have to make everyone happy — but different stakeholders will have different, often conflicting, incentives and preferences.
- Monthly vs. Upfront Payments
- Selling vs. Upselling
It’s typically easier to sell more products to an existing customer than to find a new customer.
Although cost-dollars-saved are fully and immediately realized, cost cutting is limited — the most cost that can be saved is 1x expenses. There is far greater potential for revenue growth than for cost cutting.