While we all want to maximize margins, there are times when it’s more important to work on recovery of potential revenue.

Anytime you have a product or service that expires, you might have to think about recovering any value you can, before it expires.

As an example, a hotel room expires every day. Once that day is over, anything that hasn’t been sold that day has no value. While a room rate might be $200 a day, if the room is empty it brings in $0. This is the reason hotels put their rooms on Hotwire, Priceline, Kayak etc. Even if they only get half their normal rate, at least they are able to recover some of the potential revenue.

Wendy’s figured out that before excess hamburgers go bad, they can turn it into Chili and recover some of the costs.

I have dealt with some contractors who don’t understand this concept at all. They are so determined to keep their hourly rates high that they go extended periods of time without work. If they were willing to lower their hourly rates some, in exchange for more guaranteed work, they would be much more profitable (but not be able to brag about their hourly rate).

When your product or service is going to have zero value be willing to look at ways to recover some of the potential revenue.

Have a great day!