Cost Structure

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What are your most important costs?

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In this step, we will develop how your company views costs and what costs it requires to operate. Below are two types of cost structures, reflect how your company chooses to utilize them:

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Value-Driven

Focus on improving high-value propositions.

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Cost-Driven

Focus on reducing costs whenever possible.

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(Attention: many business models fall in between these two structures)

Below are 4 characteristics of cost structures, reflect on how each of them may pertain to your company's costs:

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Fixed Costs

Costs that remain the same no matter the volume of goods or services produced.

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Variable Costs

Costs that change proportionally to the volume of goods and services produced.

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Economies of Scale

Costs are reduced with the increase of the volume of goods and services produced.

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Economies of Scope

Costs are reduced with the increase of business operations.