Don't just look at what you spend. Look at what activity makes you spend it . That activity is your cost driver. Manage the driver, and the cost follows.
Then Leo explained the secret language of business. She called them .
One Tuesday, her accountant, a patient woman named Leo, sat her down with three months of receipts. what are cost drivers
"That's the heat," Mariana sighed. "The air conditioner."
Mariana owned a bakery called "The Daily Rise." For two years, her books were a mess. She knew she spent money—on flour, on staff, on the old oven that wheezed like an asthmatic dog—but she couldn't tell why the costs went up and down. Don't just look at what you spend
So she changed things.
Within two months, The Daily Rise's profit margin rose from 8% to 14%. The oven still wheezed. But now, Mariana knew exactly which pedal to push—and which to lift her foot from. Manage the driver, and the cost follows
"A cost driver," Leo said, "isn't just a cost. It’s the activity that makes the cost appear. It’s the engine. The gas pedal."