At a six percent net margin, a dollar saved is worth about sixteen dollars of new revenue. That is the whole argument for this step. Most owners spend their effort on the revenue side because it feels like growth, and spend their cost effort on the small visible items because those feel controllable. The result is a lot of work for very little, while the three costs that actually decide the business go unexamined for years.

The risk of not doing it is quieter. A business that does not know its cost structure cannot price properly, cannot tell a profitable customer from a busy one, and cannot answer the question a lender asks when margins are thin: what would you cut, and what would it do.

You need twelve months of categorised expenses, which means the bookkeeping step has to be done. A forecast or an analysis built on three months will mislead you, because insurance, tax and licence renewals are annual and will either be missing or counted as though they happen monthly.

Have your profit and loss for the last complete year open, and your revenue figure for the same period.