What should a game studio fix first when costs rise faster than revenue?

I’m interested in hearing from people who have experience running or working closely with game studios.

Suppose a small or mid-sized studio has good projects and a talented team, but development costs keep increasing while revenue isn’t growing at the same pace. What would you look at first?

Would you focus on:

  • Reducing unnecessary development costs?
  • Improving project planning and production workflows?
  • Focusing resources on the strongest project?
  • Changing the business strategy?
  • Bringing in an experienced turnaround leader to review the situation?

I think the difficult part is knowing which costs are actually unnecessary without damaging the team’s ability to deliver quality games.

I’d be interested in hearing how developers, producers, and studio managers would approach this situation.