Number of words: 224

The former owner of Richier was producing so many products and selling them in so many places in such a small volume, that there was just no way to put this Humpty Dumpty company back together. We needed to simplify and identify the products that made money and expand on those. But there were so many fixed costs that revenue kept dropping faster than cost, as we weeded out low volume products. The only answer was to take each product line and sell it to some other company, whose primary business was that product. And that is what we did. We levitated for two years until we could sell it in pieces.

 Companies can drive themselves into the grave, chasing incremental profits. Richier had assumed it could create enough volume and enough price to pay for materials. But a hundred and one products and 200 countries later, it wasn’t working.  One day, the annual revenue growth stops, and with all of those fixed costs you die. The lesson learnt: contain and control your costs, count all your costs, allocate your cost to every product and price to make a profit. If you do that, you can have a healthy company that isn’t digging itself deeper and deeper into trouble.

Excerpted from Pg 55-56 of ‘Lessons from the heartland of American Business’ by Gerald Greenwald