Bill CanadyCEO & Founder, The 80/20 Institute · Be a Great CEO: Learn how to Fix it, Grow it, & Sell it.

Unexamined Baselines KILL Your Business: The Compounding Cost Trap! #shorts

28 Aug 2026 · 1 min

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In this concise business insight, Bill Canady explains how hidden baseline costs—such as a departed sales‑justifying customer, a discontinued product line, or an unused reporting package—remain invisible because they are not reflected as incremental changes. Over time these baselines compound: a modest 5% increase applied to an already bloated cost base yields a far larger dollar increase than the same percentage applied to a clean base. Consequently, companies with poor cost structures see their expenses grow faster, creating a self‑reinforcing cost‑inflation trap.

Chapters

Think about what that means over a 5-year period. The customer who justified that inside a sales team is gone. The product line that needed that engineer got discontinued. The reporting package that 2 people took them to produce goes to a distribution list where nobody has opened it since the last CFO. None of that shows up because none of it is a delta. It's a baseline. Baselines are invisible. And here's the compounding part. Baselines get multiplied. 5% on top of a bloated base is a bigger dollar number than 5% on top of a clean one. So the businesses with the worst cost structure grow their cost structures fastest.