Two easy ways for executive teams to attempt to raise profits is to lay off employees to cut costs or to lower prices to take away market share from their competitors. But these are merely short-term fixes. An organization cannot reduce its costs and prices to achieve long-term sustained prosperity.
Entrepreneurs know the age-old adage, "you need to spend money to make money." However, belt-tightening an organization's spending can be haphazard. Rather than evaluating where the company can cut costs, it is more prudent to switch views and ask where and how the organization should spend money to increase long-term sustained value. This involves budgeting for future expenses, but the budgeting process has deficiencies.1
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