Consequences

Imagine you want to ramp up the sales in Q2 so you decide to reduce the price. 

People love a good deal so revenue increases.

Mission accomplished.

You’ve increased sales and revenue is up. Was it the right play? When making a decision consider the second-order consequences. Your goal was to make more money. 

You look at your Q2 P&L and revenue is up. It’s up because you chose to reduce the price and the market responded. Your net profit is down from Q1 because of the 2nd order of consequences. 

Your margin took a hit because of the price reduction and you had to hire a couple of new people to handle the volume.