Often times, new entrepreneurs will focus on trying to drive profit and profit margins very early on. Does that sound like you?
The bottom line is certainly important. But it might be time to refocus your priorities.
Top-line, bottom-line. They’re terms that are thrown around so often that the meaning often gets confused. Let’s get clear on definitions. Your bottom-line is the net income that’s left after all of your expenses – like product costs, shipping, payroll, interest, taxes, general overhead, etc. Top-line revenue, then, is the revenue generated before any expenses are deducted. You might just refer to it as “sales”.
We see business owners all the time who have great profit margins, but their business is a little too stagnant for their liking.
When you focus solely on your bottom-line, you might be making a huge mistake by neglecting to push towards growth. The focus on the leftover money at the end of the period keeps you from putting some much-needed investment into yourself and your business.
If it didn’t affect your bottom-line, would you look for a new hire? Would you invest more in marketing? Would you improve your product or service with higher quality materials or features? All too often, business owners can’t get over the mental hurdle of letting go of the extra money spent. It just seems too expensive.
However, you might be depriving yourself of the potential long-term benefits of investing in growth strategies because you’re blinded by short-term numbers.
Instead, your business could grow exponentially when you focus on long-term gains and strategies that will permanently increase your profits, like getting more clients, more sales, hiring the best talent, or improving your brand experience.
Of course, it’s important to invest wisely. Consult a trusted business partner to see the gaps in your business that could use the most improvement.
But, at the end of the day, here’s what you should consider: Would you rather run a company that brings in $2M in top-line revenue with 10% of that going to the bottom line, or a company with $250K in top-line revenue with 40% of it going to the bottom line? That’s easy math, right?
When we only focus on short-term, bottom-line gains, it’s easy to miss out on the dollars (and lots of them) that are within our earning potential.
Are there gaps where your business could invest? Do you need a business advisor and not just an accountant or tax preparer? Give us a call today to discuss how you could be growing your business.