The majority of small business owners believe that their success or failure revolves around their top line revenue or increasing sales. Many times, I will hear the following comment from business owners:
“My company did a million dollars in sales last year and we lost some money, but if we get the sales up to 1.5 million, we will make a great bottom line profit.”
IS THAT TRUE?
The short answer is “probably not”.
If it’s always about the top line revenue, how do companies doing billions of dollars in top line revenue go bankrupt or out of business altogether? You’ve heard of them – companies such as K-Mart, LTV Steel, GM & others. These companies were doing billions in top line revenue and yet, it was not a guarantee of continuing success.
It is critical that a business owner understand that the results they produce with their top line revenue and managing to produce specific results is what business ownership is really about. If the underlying company is not managed with a system that is properly structured to produce bottom line profit results, increasing the top line revenue simply means you will work much harder. You will be able to say that the sales are up from last year and still produce profit results that are not acceptable. You won’t make a ton of money as you believe. You’ll just have more of everything to worry about.
Top line revenue growth is extremely important and I am not discounting that importance at all. Business owners should stay focused on driving the top line revenue ever forward and upward with a comprehensive sales & marketing program or programs. However, I am saying that the same level of focus and efforts should be placed on the bottom line profit results as well. Don’t assume that the bottom line profit will be there just because the top line revenue looks great or better than it did last year or the year before. It won’t!
If you want the best results, you have to control all the components that will produce those bottom line profit results. If you don’t have control, the bottom line results will not be there at the end of the year. Don’t wait to get control. Start developing a properly structured system that you can manage to produce bottom line profit results now!
Download the Strategic by Design Guide: Eliminate Over 80% of All Management Problems to learn more about how to develop a properly structured business system to produce better bottom line results.
ABOUT THE AUTHOR:
Terry McGill is a small business consultant and managing partner of Strategic Business Directs.