Products don't sell themselves. It takes people, planning, and effort to run a business.
If I'm doing $Y this year, and next year I want to do 2x$Y, costs will actually increase superlinear to revenues. The goal of every company is to reach a point where revenues outpace costs, but business doesn't work that way and things are rarely predictable and many successes are rarely repeatable.
If you're a retail business, it costs money to maintain a lease and storefront not to mention hire and manage employees. You also have overhead to deliver product to each individual store, and shipping isn't free. Nor is the coordination of deciding what product to ship to what store, because maybe they have different weather and one place sells more of a certain category.
Maybe you're selling online, so you have to invest in performance marketing. Or you're sending catalogues through a 3rd party vendor. Reaching new customers is expensive.
Maybe you decide to invest in in-house manufacturing, which requires many millions in upfront capital expenses, equipment acquisition, and expensive ERP integrations with machining and scheduling software.
Actually running a business is hard, and there are many variables that come up. The best you can do is try and maintain a consistent margin, and manipulate the many different levers available to do so. Maybe that's opening new stores, or closing poor performers. Maybe it's laying off staff. Maybe it's expanding into new categories, or cutting your loss on categories that didn't work out. Maybe your staple product that was driving the core of your business for years is quickly loosing steam, and you have to find alternatives.
If I'm doing $Y this year, and next year I want to do 2x$Y, costs will actually increase superlinear to revenues. The goal of every company is to reach a point where revenues outpace costs, but business doesn't work that way and things are rarely predictable and many successes are rarely repeatable.
If you're a retail business, it costs money to maintain a lease and storefront not to mention hire and manage employees. You also have overhead to deliver product to each individual store, and shipping isn't free. Nor is the coordination of deciding what product to ship to what store, because maybe they have different weather and one place sells more of a certain category.
Maybe you're selling online, so you have to invest in performance marketing. Or you're sending catalogues through a 3rd party vendor. Reaching new customers is expensive.
Maybe you decide to invest in in-house manufacturing, which requires many millions in upfront capital expenses, equipment acquisition, and expensive ERP integrations with machining and scheduling software.
Actually running a business is hard, and there are many variables that come up. The best you can do is try and maintain a consistent margin, and manipulate the many different levers available to do so. Maybe that's opening new stores, or closing poor performers. Maybe it's laying off staff. Maybe it's expanding into new categories, or cutting your loss on categories that didn't work out. Maybe your staple product that was driving the core of your business for years is quickly loosing steam, and you have to find alternatives.
If only the product cost was my biggest concern.