Focus on Profitability Not Revenue Growth

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The primary mission of a business should be long-term profitability not just revenue growth.  “Profitability is a measurement of efficiency.”  It ultimately is the deciding factor in the success or failure of a business. “It is expressed as a relative, not an absolute, amount. Profitability is “the ability of a business to produce a return on an investment based on its resources in comparison with an alternative investment. Although a company can realize a profit, this does not necessarily mean the company is profitable” (see more about profitability at Investopedia.com).

Revenue versus Profit Growth

More revenue from sales does not always mean more profit.  Revenue is only part of the story. Revenue minus expenses equals profit.  A business must keep their costs as low as possible to make sure it is maximizing its profits.  How do you maximize profits?

The key is to answer some very important questions about your business relative to your industry.  Some of these questions are as follows:

What is the state of your industry relative to the overall economy?

How big is your market opportunity and how fast is it emerging?

Is your business privately owned or backed by venture capital?

Is your organization the first supplier in the marketplace?

Does your firm have patents, trademarks or a great deal of product complexity to protect your market position?

Do you have a competitive advantage in the industry that you can increase overtime?

Sustained Profitability

Many organizations depend on revenue growth to drive the scale of the business.  The real determinant of growth is creating long-term profitability through efficient operations.  This point is made very clear in the Pacific Crest Group (PCG) case study “Consulting Firm Saved Overhead Cost by $250K in the First Year of Service”.  PCG streamlined internal accounting processes, increased the efficiency of the technology infrastructure and improved employee management for this business.  Executing an efficiency strategy utilizing this combination resulted in a large operation cost savings, better cash flow management and greater profitability.

 

The Pacific Crest Group provides professional services that keep your business focused on your critical objectives.  We create custom made financial and Human Resource (HR) systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements designed specifically to maximize all of your business opportunities.