Profitability is not just about cutting costs

When margins are tight, the first instinct is to cut costs.

Sometimes that is the right move. Often it is not.

Cutting costs without understanding what drives value can make things worse. You might save money in the short term but lose customers or quality in the long term.

Profitability comes from understanding three things:

What do customers actually value? What does it cost to deliver that value? Where is there waste in the process?

The best businesses I have worked with focus on the first two questions before they think about cutting.

Sometimes the path to profitability is charging more, not spending less. Sometimes it is doing fewer things but doing them better.