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How much did that sale cost? What about the reorder? Until you know that you don't know if you're making money. 

You often see line items on business plans for the cost of goods sold, also known as COGS. Most startups are painfully aware of the cost of goods, but there is another cost that is even more painful if it’s overlooked, and that is the cost of sales.

In today’s “scale fast and fail fast” world of entrepreneurship, it’s easy to scale fast and fail permanently when you don’t appreciate the true cost of sales. Part of the problem of scaling fast is that you can scale so fast that you actually make sales you can’t sustain.

Why? Because you inadvertently chose to make sales to a customer or in a territory with costs you can’t afford. But you didn’t know those costs when you made those sales. In fact, you were probably thrilled to make any sales and couldn’t wait to get back to your investors with the news!

Authors: Michael Houlihan & Bonnie Harvey

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