It’s time for the IRS. How prepared are you? How much time have you spent on presenting the best of all declarations with the most of possible deductions? How much time did it take you? And the next question is: is your propensity to focus on cost higher than that on focusing on revenues.

With the IRS you have only one choice (to cut your costs), but in business you are to address both of them; profits are calculated by revenues minus costs.

In investments you can be tempted to sell the stocks that have been outperforming (take your profit) and let the losses continue to grow. Professionals are acting the other way around; they cut their losses and let their profits grow.

Yet a loss is not perceived as a cost, because in investments, you are dealing with portfolio value. And value changes are perceived differently. An increasing portfolio value is perceived as a profit, but a decrease in value is not perceived as a loss. That is why many private investors (according to the professionals) are less active and control their portfolio less when the market is going down.

In business you can focus on both cost and revenue. There are time periods where revenue is most popular (during the days of the new economy) and these are followed with periods where the focus is all set on costs (we’re back down to earth).

A day has only twenty four hours. The time you spend on one (cost savings tactics) cannot be spent on another (looking for more revenues). People sometimes forget this.

The profit equation is however still valid. You should focus on both, but normally one is preferred above the other.

Check this for yourself.

© 2005 Hans Bool

Hans Bool is the founder of Astor White a traditional management consulting company that offers online management advice. Astor Online solves issues in hours what normally would take days. You can apply for a free demo account

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