Your Profit and Cost Centers

Businesses divisions are either: 

• Profit centers: where resources are made

• Cost centers: where resources are spent, typically on critical functions

An example of a profit center is a sales team. The people on this team should bring in more revenue than their compensation.

A cost center is a critical function, like HR or Legal. These divisions don’t generate revenue, but they do support profit centers. When managed correctly, they can save the company resources.

You too have profit and cost centers. 

Your profit centers are: 

• Your job, career, side hustles. Anywhere you make an active return.

• Your investment holdings. Anywhere you make a passive return.

• Your friends and family. Anywhere you make a psychological return.

 Your cost centers are: 

• Your exercise routine. This costs energy, time, and money, but provides physical and mental support. 

• Your sleep cycle. This costs night-time fun, but provides cognitive support. 

• Your education. This costs time and money, but provides intellectual support.

Intuitively, you should generate more profit than costs. However, don’t neglect your cost centers – they provide a critical base for your future profitability. On the flip side, don’t invest too many resources in exercising, sleeping or learning – real world action is imperative for a life well lived. 

Generate, rest, then repeat.

PK