Cost of Revenue and Overhead Cost Structuring
Managing and optimizing the Cost of Revenue and Overhead Costs are essential to profitability and they are directly linked to industry leadership and corporate returns.
A business’s cost structure will be dictated by its nature (service vs. manufacturing, industry type, level of globalization). Our teams of analysts initially work with our clients’ financial data to deconstruct the cost elements to understand the key cost drivers. We utilize industry open-source benchmarking, together with our proprietary databases to identify opportunities for cost optimization.
Our specialists review categories of the cost structure; labor-related costs (salaries, wages, benefits, commissions, bonuses, etc); and non-labor costs (materials, transportation, facilities, software, hardware, telecoms, professional services, travel, etc). We prioritize those areas with the largest opportunity for cost optimization, then develop implementation road-maps to assist our clients to re-structure their costs to ultimately drive margin improvement.
As organizations grow, overhead or support costs within business units can become disproportionate, and those costs are associated with the SG&A cost structure that includes sales, marketing, finance, HR, IT, legal, facilities, and general management / admin. Also through our open-source benchmarking process, we identify those areas within the overhead structure that are above the median benchmark range. We examine and develop, by overhead function, the various levers for optimizing the way overhead functions are delivered – such as consolidation, outsourcing, offshoring, decentralized vs. centralized, process simplification, automation, menu-based pricing, or service level agreements. Together with our client teams, our specialists will develop action plans to drive lower cost structures.