In one case, they calculated the cost-savings from discontinuing a product (eg $6000) and then calculated the reduction in profits (from lost sales of the discontinued product eg $2000). Then they did Net gains = Cost savings - reduction in profit (I.e $4000) Do we need to do this step? Typically I always see calculations with closing down a factory or any discontinuation of service on just a cost-savings basis.
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Hi there,
This is actually a better way to do it. Even cost-cutting questions/prompts should consider net profits.
Think about it logically: if you as a company cut costs and lose profits as a result, did you make a good decision?
That said, #1 thing you have to do is be clear on the objective. Clarify what the goal of the client is, and make sure you understand how they measure success. Every case is different!
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Hi there,
I agree with Ian that you should clarify the goal of the case first.
Best,
Francesco
