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An Idea A Day by David Thompson

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PROFITABILITY

COMPLEXITY BREEDS COST

Anne Hawkins

DO YOU OFFER a wide-range of products or services? … to many different customers? … in many different markets? … do you have lots of different suppliers?

While some diversification may be appropriate to reduce risk, too much can sink the business.

The idea

The complexity of your business will play a key factor in determining how much it costs to run. For example, many businesses claim to make great margins on their spares, but may overlook the additional costs they incur through complexity.

Consider the small local village shop and its inability to negotiate massive discounts from suppliers. ...

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