During a growth or downturn period in any professional firm, one major area that gets overlooked in the planning process is the firms cost structure. It’s not the most exciting aspect of the business for firms, but by understanding your firms true direct costs (marginal costs) associated to revenue activities and what are the fixed operational costs, firms can ensure they are as profitable as they can be while maintaining revenue.

Once the firm understand their current optimum cost structure, they then need to understand the link between direct costs (if any) to operational costs as your profitability can sometimes decrease for a margin revenue increase.

Jason Popelier takes you through an example of a firms costs structure and explain what each firm needs to consider and why.