Understanding Cost Analysis

🔥 Let me tell you about an extremely expensive mistake I see companies make every day. When I gave my TEDx talk "Save your company money; give your employees a raise," seven years ago, I shared a shocking statistic: 27% of employees were actively considering leaving their jobs at the time. The number has risen to 40% in 2024. Here's the kicker: replacing just ONE employee costs companies 100-200% (with outliers quoting as much as 400%) of that person's annual salary in Recruiting costs Training time Lost productivity Customer dissatisfaction Lost business opportunities Brain drain Do the math: For a €100K position, you're potentially looking at €200K or more in replacement costs. And guess who makes up a disproportionate number of these departures? The high-achieving women who are chronically underpaid and undervalued. Many companies are spending seriously on hiring women, and they often reach 50% or even more women at the point of intake. Only to completely drop the ball on retaining their talent, with the serious financial repercussions mentioned before, whilst ignoring the simplest solution: Promote. Your. Women. And Pay. Them. More. This isn't about DEI initiatives or moral imperatives (though those matter). This is about your bottom line. This is about business intelligence. Your CFO needs to see this math: Investment: €20K raise for a valuable female employee to get her to parity with her male peers. Alternative: €200K+ replacement costs when she leaves. And she will: there are plenty of companies out there ready to snap them up at market rate. The ROI isn't just clear - it's staggering. 🎯 If your C-suite needs help understanding how to: Identify flight risks before it's too late Calculate the real cost of turnover in your organization Create retention strategies that actually work Build compensation structures that make business sense Let's talk. I consult with forward-thinking companies ready to turn this knowledge into competitive advantage. I train teams of leaders who want the benefit of an engaged, motived work-force. Because the most expensive thing you can do? Is letting your talented women walk out the door. Message me directly or reach out via support@womeninnegotiation.org to discuss how we can protect your company’s bottom line. #BusinessStrategy #RetentionStrategy #WomenInBusiness #TalentManagement #ROI

How to uncover your pricing cheat codes Think your product might be too expensive? Before you lower your price, read this story: A company we worked with had a $350 product with a confusing home page. We re-wrote the copy to be super clear using the “now you can” headline formula, and their conversion increased by 40%. For the second experiment, we bumped up the price to $499, and guess what? It made 𝘢𝘣𝘴𝘰𝘭𝘶𝘵𝘦𝘭𝘺 𝘯𝘰 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘤𝘦 𝘪𝘯 𝘤𝘰𝘯𝘷𝘦𝘳𝘴𝘪𝘰𝘯. I’ve never been so happy to see an inconclusive A/B test. 😁 𝗧𝗵𝗲 𝗽𝘂𝗻𝗰𝗵𝗹𝗶𝗻𝗲: Once people clearly understand the impact a good product will have on their lives, 𝘵𝘩𝘦𝘺 𝘣𝘦𝘤𝘰𝘮𝘦 𝘢 𝘭𝘰𝘵 𝘭𝘦𝘴𝘴 𝘱𝘳𝘪𝘤𝘦 𝘴𝘦𝘯𝘴𝘪𝘵𝘪𝘷𝘦. 𝗛𝗼𝘄 𝘁𝗼 𝗰𝗼𝗻𝗱𝘂𝗰𝘁 𝘁𝗵𝗲 “𝗱𝗼𝗼𝗿-𝗶𝗻-𝘁𝗵𝗲-𝗳𝗮𝗰𝗲” 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝘁𝗲𝘀𝘁 How do you unpack your customer's pricing psychology and find out exactly what they’d be willing to pay extra for? I call this the “door-in-the-face” pricing test. Next time you’re pitching somebody on your product or doing a validation interview try this: 1. Go through your normal sales pitch or customer interview process until it’s clear they understand the product, are excited about it, and ready to buy.     2. Then, instead of offering them your normal terms, keep it light and friendly, but suggest a surprisingly high price, like “What if I told you it cost $1,000 per month?” (They’ll probably say “no.” That’s perfect).     3. If they say “no,” again keep it friendly and say: “Fair enough, that’s a high price, we’re still figuring out the actual cost. But tell me, 𝘸𝘩𝘢𝘵 𝘸𝘰𝘶𝘭𝘥 𝘰𝘶𝘳 𝘱𝘳𝘰𝘥𝘶𝘤𝘵 𝘯𝘦𝘦𝘥 𝘵𝘰 𝘥𝘰 𝘵𝘰 𝘣𝘦 𝘸𝘰𝘳𝘵𝘩 $1,000 𝘱𝘦𝘳 𝘮𝘰𝘯𝘵𝘩?” Then just be quiet.     4. Stay silent and give them a moment to think about it. Listen carefully because they’re about to give you the cheat codes to premium pricing. They may say something like:    - “𝘐𝘵 𝘸𝘰𝘶𝘭𝘥 𝘩𝘢𝘷𝘦 𝘵𝘰 𝘳𝘦𝘱𝘭𝘢𝘤𝘦 ___ 𝘴𝘰𝘧𝘵𝘸𝘢𝘳𝘦”    - "𝘔𝘺 𝘵𝘦𝘢𝘮 𝘸𝘰𝘶𝘭𝘥 𝘯𝘦𝘦𝘥 𝘵𝘰 𝘣𝘦 𝘢𝘣𝘭𝘦 𝘵𝘰 𝘥𝘰 ____”    - “𝘐𝘧 𝘪𝘵 𝘮𝘦𝘢𝘯𝘵 𝘸𝘦 𝘤𝘰𝘶𝘭𝘥 𝘴𝘵𝘰𝘱 𝘱𝘢𝘺𝘪𝘯𝘨 𝘢𝘨𝘦𝘯𝘤𝘪𝘦𝘴 $50𝘒 𝘱𝘦𝘳 𝘮𝘰𝘯𝘵𝘩 𝘵𝘰 𝘥𝘰 ____, 𝘵𝘩𝘢𝘵’𝘴 𝘢 𝘯𝘰-𝘣𝘳𝘢𝘪𝘯𝘦𝘳”     5. If your product already does those things they mention, happy days – rewrite your home page! If not, start bringing your Head of Product to these pitch meetings. 😏 By the way, sometimes they just say yes. Twice now, people have heard my super high price and just said “that’s fine.”  In-fact, they even explained their business case to me. They mentioned other comparable services in their budget that cost them more than what I was asking, so the amount I proposed seemed fair in comparison. (Naturally, I added those comparisons to my pricing page.) I hope that’s helpful! But it’s a teeny little idea – less than 1% of the insights I share in my weekly newsletter – linked from my profile Matt Lerner

💰 The Real Cost of Losing Good Employees Here's the truth most leaders don't want to face: You're literally bleeding money by ignoring your people. Let's break down the REAL costs: 1. Direct Replacement Costs • Recruiting: $4,129 per hire • Training: 1-2 months of salary • Lost productivity: 1-2.5x annual salary 2. Hidden Costs (The ones that REALLY hurt) • Knowledge gaps: 3-6 months to get a new hire up to speed • Team morale drop: 70% of remaining employees become flight risks • Client relationships: 25% at risk of leaving with the employee 🔑 Key insight: It costs 1.5-2x an employee's salary to replace them. For a $100k employee, that's $150-200k down the drain. So, what are smart leaders doing? ✅ Regular market-rate adjustments ✅ Building clear paths for growth. ✅ Meaningful recognition ✅ Flexible work arrangements ✅ Investing in skill-building. Remember: The cost of prevention is ALWAYS lower than the cost of replacement. 🎯 Quick action item: Calculate your potential turnover costs. Then redirect 30% of that budget into retention strategies. Your bottom line will thank you. ♻️ Share this with your network 🔔 Follow Sanjiv Beri for more insights visual credit: Linda Reddy

A DTC fashion brand founder reached out to me, frustrated. "We’re spending lakhs on ads, but every new customer is costing us ₹1,200. How do we scale without burning money?" I checked their numbers: 📉 Customer Acquisition Cost (CAC): ₹1,200 📉 Repeat Purchase Rate: 12% (way below industry standards) 📉 Average Order Value (AOV): ₹1,800 (low margin for ad-heavy growth) 📉 ROAS: 2.1X (barely breaking even) They were stuck in the classic DTC trap: 🚨 Scaling cold traffic with direct sales ads 🚨 Over-relying on discounts to convert 🚨 No focus on repeat purchases or brand loyalty We flipped the strategy in 3 steps: 🔹 Built a Content-First Funnel → Instead of selling immediately, we warmed up cold traffic with: • UGC & influencer testimonials (trust-building) • "How to style" content (engagement) • Brand storytelling ads (higher click-through rates) 🔹 Reworked Retargeting → Instead of spamming discounts, we created: • Social proof ads (before & after styling looks) • Exclusive limited-edition drops for engaged audiences • Cart abandonment sequences with urgency-driven copy 🔹 Fixed Retention & LTV → Profits come from repeat customers, so we: • Introduced personalized post-purchase offers • Built a VIP program for early access & loyalty perks • Increased email + WhatsApp engagement (repeat buyers grew 2.3X) 💡 60 days later, here’s what changed: ✅ CAC dropped from ₹1,200 → ₹740 ✅ Repeat purchase rate jumped from 12% → 28% ✅ AOV increased from ₹1,800 → ₹2,300 ✅ Monthly revenue scaled from ₹15L → ₹24L 🚀 Scaling isn’t about cheaper ads. It’s about smarter customer journeys. If you’re struggling with CAC, ask yourself: ⚡ Are you educating cold audiences or just pushing sales? ⚡ Is your retargeting strategy fixing objections or just repeating the same ads? ⚡ Are you retaining customers or constantly chasing new ones? Fix your funnel, and you’ll scale profitably. What’s your biggest challenge in lowering CAC? Drop it below.👇 #DTCGrowth #ScalingStrategies #CACReduction #RetentionMarketing

One of the top traits of startups who sell well: Pricing Products Right Here’s how to start: 🔷1/ Start with the buyer persona Think about who your hypothesised buyer is. This should be informed by your early conversations in the market. Define their characteristics: - Firmographics (e.g. B2B Saas company at $1M ARR) - Role (e.g. VP of marketing managing team of 10) - Pains & triggers (e.g. Struggling with data transparency) etc. 🔷2/ Interview/survey them I don’t mean send a Google form link to 200 people and expect magical answers back. Pick a cohort of these personas and find out: - Their current top priorities in their jobs - Challenges they’re facing that are most painful - What they’ve tried (alternatives offer price examples) - What they value most (feature sets) - Price sensitivity (willingness and ability to pay) Some example questions for the latter on price: 💬 At what point is this way too expensive that you would never consider purchasing it? 💬 At what point is this way too cheap that you'd question the quality of it? Set the ballpark - and work the middle. 🔷3/ Test your pricing Share pricing in your sales pitches, pricing pages - anywhere where customers might seek that info. You have two options: a . A/B test the pricing page for conversion with paid traffic b . Run demos and record reactions in pricing conversations The feedback you get from doing this should tell you a few things. If your feature lacks value to match pricing. If pricing needs to be adjusted upwards or downwards. 🔷4/ Weigh the opportunity cost If you double your prices and half your customers leave… Good decision? Great decision. ✅ You basically have to sell less product to make the same amount. You get instant scale. Naturally things don’t always happen that way, Carefully consider the downside before making any decisions. --- All in all, don’t be afraid to make price adjustments. It’s normal for prices to be experimented with and fluctuate as you scale. Just make sure to let your customers know about any permanent changes. Pick your price carefully. #pricing #startups #saas

Startups often focus on rapid expansion, but without strong unit economics, growth can become a ticking time bomb. Homejoy, a promising home-cleaning startup, by Adora Cheung Aaron Cheung, is a prime example of how scaling without data-driven insights can lead to failure. 🔍 Background Founded in 2010, Homejoy sought to revolutionize home cleaning with an easy-to-use online booking platform. The company raised over $40M in funding and aggressively expanded across multiple cities, fueled by paid marketing campaigns. 📉 What Went Wrong? Despite its rapid rise, Homejoy shut down in 2015. The key issue? Poor customer retention and unsustainable customer acquisition costs (CAC). 📛 The company spent heavily on paid ads, acquiring new customers quickly but struggled with repeat bookings. 📛 Many users signed up using heavy discounts but didn’t return at full price. 📛 High churn rates meant that CAC kept rising while lifetime value (LTV) remained low. 📛 Instead of addressing retention issues first, Homejoy continued expanding, leading to cash burn. 📊 How Data-Driven Decision-Making Could Have Helped ✅ Cohort Analysis – Tracking customer behavior over time would have revealed low retention rates early, prompting adjustments before expansion. ✅ LTV vs. CAC Tracking – Understanding the gap between customer acquisition cost and lifetime value would have signaled the need for a pricing or engagement strategy change. ✅ Churn Prediction & Customer Segmentation – Identifying which customers were more likely to stay could have helped focus marketing efforts on high-retention segments. 🚀 Key Takeaway Scaling is not just about growth—it’s about sustainable growth. If your startup is acquiring users but not retaining them, you’re not building a business—you’re buying one (temporarily). Before expansion, ensure you have strong unit economics. Growth driven by data is not just a choice—it’s survival. 𝑾𝒉𝒂𝒕 𝒐𝒕𝒉𝒆𝒓 𝒔𝒕𝒂𝒓𝒕𝒖𝒑𝒔 𝒅𝒐 𝒚𝒐𝒖 𝒕𝒉𝒊𝒏𝒌 𝒔𝒖𝒇𝒇𝒆𝒓𝒆𝒅 𝒇𝒓𝒐𝒎 𝒔𝒊𝒎𝒊𝒍𝒂𝒓 𝒎𝒊𝒔𝒕𝒂𝒌𝒆𝒔? 𝑳𝒆𝒕’𝒔 𝒅𝒊𝒔𝒄𝒖𝒔𝒔 𝒊𝒏 𝒕𝒉𝒆 𝒄𝒐𝒎𝒎𝒆𝒏𝒕𝒔! #StartupEcosystem #DataDrivenDecisionMaking #Startups #StartuFailures

🛑✋ Stop searching for the magic profitability bullet for your vendor business with #Amazon. 𝗜𝘁’𝘀 𝗮 𝗳𝗮𝗶𝗿𝘆 𝘁𝗮𝗹𝗲 𝘁𝗼𝗹𝗱 𝗯𝘆 𝗮𝗴𝗲𝗻𝗰𝗶𝗲𝘀 𝗮𝗻𝗱 𝘀𝗲𝗿𝘃𝗶𝗰𝗲 𝗽𝗿𝗼𝘃𝗶𝗱𝗲𝗿𝘀. I see this all the time: 1P sellers are told that a 3P business would be more profitable. 3P sellers are advised that 1P is the solution to keep scaling. Brands that have tried both are told a DTC approach with Buy with Prime (BwP) is the way to higher profit margins. But here's the problem: 🚩 1P doesn't scale if you don't know how to negotiate, 🚩 3P is not automatically more profitable than 1P, and 🚩 DTC requires a very different set of skills. None of these generic recommendations should be taken seriously in the first place. This is because each model serves different organisational constellations for brands with different capabilities. So just because your #1 competitor is adopting a hybrid strategy with Amazon, don't assume copying their decision will also lead to better margins for your business. The opposite is true if your operating setup and internal capabilities are just an inch different. Instead, make sure you consider »your« unique setup: 𝟭- 𝗖𝗮𝗹𝗰𝘂𝗹𝗮𝘁𝗲 𝗰𝗼𝘀𝘁 𝗰𝗼𝗺𝗽𝗮𝗿𝗶𝘀𝗼𝗻𝘀 𝗯𝗲𝘆𝗼𝗻𝗱 𝗴𝗿𝗼𝘀𝘀 𝗺𝗮𝗿𝗴𝗶𝗻𝘀 Different sales models come with different hidden cost requirements. A 3P account requires you to manage pricing and inventory yourself. With a DTC account, you must factor in the cost of maintaining and regularly updating the underlying technology. These are all costs you must bear yourself or outsource via service providers, which can quickly add hidden cost centres to your P/L. When evaluating the business case, make sure you go beyond a line-by-line comparison of existing costs. 𝟮- 𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱 𝘆𝗼𝘂𝗿 𝗶𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝘀𝘁𝗿𝗲𝗻𝗴𝘁𝗵𝘀 Instead of chasing the next "big thing" that may not even fit your team's existing strengths, your Amazon strategy needs to look at where you can leverage an existing competitive advantage. Most audits I see that recommend moving from a 1P to a 3P setup are mainly concerned with commercials, but ignore the available capabilities in an organisation. And when implementing these recommendations, brands risk ignoring the opportunity costs of misaligning their future strategy with current competencies. 𝟯- 𝗧𝗲𝘀𝘁 𝗯𝗲𝗳𝗼𝗿𝗲 𝘀𝗰𝗮𝗹𝗲 Don't go at it all at once when changing your Amazon business model. The enforcement of strict policies can limit your ability to move from an existing 1P or 3P setup. I have seen countless manufacturer brands banned from selling on 3P directly or indirectly because they just wanted to escape trade negotiations with their Vendor Managers. A better approach is to test your hypothesis in the market and not follow theoretical advice that may not stand up to the reality of selling on Amazon. --- What's your experience evaluating different sales models with Amazon? Let me know in the comments!

The Hidden Dangers of Cheap solar parts: A Path to Danger and the Risk of Fires Cheap solar parts can be tempting, especially when seeking budget-friendly alternatives. However, these devices can pose significant risks, including potential fires. Substandard manufacturing, counterfeit components, and inadequate safety features can lead to electrical fires. These fires can be caused by low-quality chargers, defective wires, or counterfeit connections. Counterfeit batteries, connectors, and chargers are also common, causing overheating or explosions during charging or use. Low-quality connectors lack proper heat regulation protection, leading to melting and malfulcation. Overheat protection is crucial in premium electronics, but cheap electronics may lack it due to poor ventilation, subpar cooling systems, or inadequate thermal management. Additionally, cheap electronics may not adhere to safety standards, exposing users to potential electrical hazards. It is essential to prioritize quality and safety when choosing electronic devices and electrical parts. Investing in certified and reputable electronics may be more expensive initially, but it is worth it for the peace of mind and security they provide. #SolarEnergy #PVSystem #SolarSafety #FaultDetection #RenewableEnergy #ElectricalEngineering #SustainableSolutions #SolarFire #SafetyProtocols #Engineering

Following my post on extending the working life of EV batteries through repair and cell replacement, I wonder if EVs could have a potentially much longer working life than ICE vehicles. The most cited objection to EV ownership is higher upfront cost, but we don't yet have accurate data sets to show what the total ownership costs of EVs are over a decade or more. I think that would be a valuable figure to know. Most EVs have aluminum or lightweight bodies that won't rust, and critically less than 50 friction-based parts compared to up to 2,000 in a combustion car. The ICE vehicle business model is built around regularly replacing many of those friction parts because of wear until it becomes uneconomical and the car is scrapped. But in an EV - as owners know - at the moment slower component wear patterns mean we only have to replace wiper blades, cabin filters, and tyres. After three years and nearly 40,000 miles, I've only had to free off my brakes through lack of use and replace two rear tyres - nothing else. There are lots of examples of EV taxis covering over 300,000 miles still on original motors and battery packs which suggests that the life expectancy of an EV could be significantly longer than some diesel and petrol cars but - and here's the important bit - cost much, much less in total ownership costs. Possibly many thousands less. In time and mileage, EVs will certainly need things like ball joints, shockers, brake discs, 12v batteries, and other consumables, but not the wallet-wilting expenditure on regular servicing, timing chain/drive belt/exhaust/clutch/brake pad/differential/gearbox repair and replacements needed on combustion cars. Reduced part failures, corrosion-free structures, and minimal maintenance costs mean that in time we'll know just how much cheaper EVs are to run over the longer term and how long their realistic service life is. Depreciation may be an issue now but as the market adjusts and prices level off, we could see demand for lower-cost secondhand EVs rise. Could we have come to the end of the built-in obsolescence and throw-away culture of modern cars? Are we now looking at a new mobility product that lasts longer, costs consumers less, has a reduced component failure rate, and over its lifetime has lower embedded carbon than petrol or diesel vehicles? It's time we worked this stuff out to get accurate cost of ownership figures for a range of EVs based not on industry algorithms but on owners' real-world numbers. We've been driving them since 2009, so there's enough data out there to do this. Knowing the whole life costs of EV v ICE might surprise us all.

Are you aware of the hidden costs in your product's raw material? : : Accurately calculating raw material costs is a cornerstone of should-cost modeling. By effectively identifying the materials required, determining the cost per unit, and accounting for potential waste and additional costs like handling and transportation, you can develop a comprehensive and reliable cost model. Key Parameters for Should Cost Process in Material Calculation: # Raw Material Identification: ·  Material type and grade ·  Material source/origin # Material Quantity: · Required quantity (per unit or batch) · Packaging units # Material Cost per Unit: · Supplier quotes · Market prices · Historical data · Discounts and bulk pricing # Material Waste or Loss: · Scrap/waste factor ·  Defects and rejections # Handling and Storage Costs: ·  Material handling · Storage costs (rent, insurance, utilities) · Inventory management # Freight and Transportation: ·  Shipping costs · Delivery method (air, sea, road) ·  Customs and tariffs # Lead Time and Order Frequency: · Lead time variations · Order volume # Supplier Terms and Conditions: · Payment terms · Return and warranty policies · Exchange Rates (For Imported Materials) # Material Substitution and Alternatives: · Substitute materials ·  Material optimization # Environmental and Regulatory Factors: · Recycling or sustainability initiatives · Regulatory compliance # Operational Overheads Related to Materials: · Processing costs · Energy costs ------------------------------------------------------------------------------------- # Ask Yourself: -> Did you consider the net weight and gross weight calculation properly? -> Did you consider scrap weight and scrap cost in your estimation? -> Do you have access to the global raw material index and recent material price database? -> Have you asked your supplier about the raw material cost per kg as well as the scrap cost per kg? -> Do you consider Manufacturing overhead (MOH) and inventory cost (raw materials)? -> What about the scrap cost percentage based on different commodities? -> Did you optimize material through strip layout, nesting, cavity, and other techniques? -> What’s your strategy when the supplier asks for material cost increases due to market fluctuations? -> Did you consider the volume/batch/MOQ impact, as well as regional cost impact, in your calculations? -> Did you consider any coating and primary requirements in the raw material stage? -> Commodity-Specific Considerations, etc.