Glossary

Cost Center

One reason it’s challenging to quantify the value of customer training is that it’s often classified as a cost center: a department that’s intended to cost the company money.  

If that’s the case, its primary role is to support business operations, often by delivering essential services that contribute to broader company goals.

In the context of customer training, for example, an education services department frequently operates within a set budget to provide onboarding, enablement, and ongoing education, driving long-term customer success even though it doesn’t generate income on its own.

That said, many customer education departments now function as profit centers, charging directly for the services they provide. The logic is clear: people value what they pay for. 

What are the Differences Between a Cost Center vs. a Profit Center?

The primary distinction between a cost center and a profit center lies in how each contributes to the business and how their success is measured.

A profit center is responsible for generating revenue and is evaluated based on its ability to drive profit. These departments or functions are expected to increase income while controlling expenses. One of the most important financial metrics for a profit center is the sales expense ratio, which is calculated by dividing total expenses by total revenue. This metric helps assess the efficiency and profitability of the team and is often used to optimize budget allocation. Sales departments are typically considered the largest and most direct profit centers within an organization.

A cost center, by contrast, does not directly generate revenue. Instead, its purpose is to support the business through essential services that contribute to long-term value. While cost centers are still expected to manage overhead and operate within budget, their success is typically measured through operational or performance-based metrics, not sales or profit figures.

For example, a customer training team, often categorized as a cost center, might track metrics such as:

• Attendance rate
• Completion rate
• Learner engagement
• Learner satisfaction
• Time to first value
• Product activation rate

These KPIs focus on how effectively the team supports user enablement and business objectives. While the work of a cost center is critical to growth and retention, its impact is often indirect, making it essential but not revenue-producing in a strict accounting sense.

The Importance of Accurate Cost Center Tracking

You can’t control what you can’t see. If you don’t have full visibility into your training budget, you can’t properly allocate it. You’ll also have no way of identifying where you might be overspending or underspending.

It’ll also be a great deal more challenging to demonstrate the value of your training. If you don’t know how much money went into a particular customer education initiative, for example, you can’t really link your organization’s investment to a tangible business outcome. 

Precise budget tracking also gives better insight into what works and what doesn’t. By measuring budget allocation against other metrics such as completion rate, you can identify areas that may require more funds or additional focus. 

Understanding the Role of Cost Centers in Training

The most important thing to remember about cost centers such as employee and customer training is that they aren’t simply investments or expenses — they’re strategic enablers. 

Customer training and customer success go hand-in-hand. A more educated audience will have a better understanding of how to maximize the value of your software, leading to more satisfied and loyal customers. They’re also more likely to become brand champions, potentially bringing in additional prospects. 

On the employee side, creating a learning culture that supports ongoing professional development can improve productivity, satisfaction, and retention. Internal learning can also help your organization address skill gaps and talent shortages through lateral hires. Someone who works in sales but has a knack for technology could easily transition into a position as a software engineer or IT professional, for instance. 

Related Content: What’s the Difference Between Training ROI and Time to Value?