Growth & Profitability
Growth & Profitability are the two most common goals of most business owners, followed by a desire to improve cash flow.
It is most common for small business entrepreneurs to express a desire to grow sales, which they assume will also increase profits. While this direct relationship holds true in most scenarios, there are other factors to consider:
- For service businesses: do you have enough time to serve existing and new customers? The availability of “time” is governed by how many employees you have as well as your personal ability to manage
- For manufacturers, distributors and retailers: can you afford the extra investment in inventories to support the growth in sales?
- Do you have sufficient “working capital” to support an increase in accounts receivable?
- Can increased sales be achieved without reducing margins?
Most successful entrepreneurs make their goals with the “end in mind”. They start with the profit they want to achieve, and then create a plan on how to meet that goal.
Common Concerns About Sales and Profits
- I can’t seem to increase my sales sufficiently to make a profit, or to make the kind of profit that I think should be available in a business of this kind
- I don’t know what amount of sales I need each day/week/month in order to cover all my costs, and provide myself with a decent standard of living
- I I have no control over my costs/expenses, so the only way to increase profits is to increase sales
- I would to better understand how much margin (sales – cost) I have on each service/product and how that affects my bottom line