When I ask that question to business owners and leaders I often get that “look” that infers I just asked a really dumb question. It is proven fact that all businesses are either growing or dying. There is no in-between. I find that sometimes we measure what is easy to calculate. As business owners or leaders of our business we can start leading our people down a slippery slope without intending to if all we seem to focus on was yesterday’s revenue performance.
Our words matter, and the words that we use to direct our people and teams matter even more. I spent a lot of years working in large businesses that really focused on revenue growth. There was so much that was assumed that would naturally happen as long as revenue was growing. Therefore, every day the amount of revenue generated at each business unit was measured and in most cases discussed. When I say “discussed”, it was generally the KPI (key performance indicator) that was the determining factor of success or failure with current leadership. It is the assumption of this belief that can often times get our businesses into trouble.
All businesses are different and certainly the large corporations that I worked for had multiple metrics they were measuring daily or weekly. They also had a great deal of human infrastructure and resources that allowed for performance to be measured. Many of you reading this do not have those resources and tend to rely on a few metrics to measure progress in your business.
If you are growing your revenues, then you may be reaching the goal you have set. That does not mean that you are growing your profits. Our focus in business should be to grow our profits first. Why do all of that work and make the investments necessary to sustain growth if we make less per revenue dollar than we did a year ago?
Do you have a profitability target? What is your percentage of gross or net profit compared to your revenue growth? If you are growing at 15% revenue growth, shouldn’t your profits grow at the same pace? Think about it, at what point will your growth in revenues create an unacceptable profit return on your investment?
Take some time to make sure you are measuring and comparing profit percentages to your revenue growth. There are so many actions you can take to improve your bottom line results but if you are lost in the day to day, you won’t see it until it starts to sting a little bit.
What is your most profitable product that you sell and is it the largest category of revenue? If not, why? I am not telling any of you not to concentrate on growing the revenues in your business, but I would caution you all to make sure that your team isn’t perceiving that as your expectation. Make sure you are specific about your dialog with them on what revenue categories you choose to grow because you have a complete and thorough understanding of how that will grow the profitability of your company.
I love our coaching chassis because it does focus on growing profits faster than the business grows its revenues. We can grow revenues at 46% growth rate with the proper strategies applied and executed with a 61% improvement in profits. That is a winning combination for any business!
If you’d like to schedule a call or find out more about what we can do for your business, please contact me. Our next event is GrowthCLUB on 3/22/201 in The Woodlands TX. This is an incredible day long workshop where business owners plan out their success for the next quarter in their business.