Turnover Vs Profits
Turnover vs profits
It is a natural phenomenon that businesses want to grow big.
The very reason businesses are started is that the promoters are ambitious.
The challenge lies in the ambition masking the understanding of growth.
Growth can be
1. In turnover
2. In profits
We are not considering the other parameters like team, customer base, market share, etc. here, since they are all contributors to either of the above two.
*It is very important to grow the top line of every business.
It is more important to ensure that the bottom line is not compromised.*
Some businesses will have only consumables and some others products needing to provide warranty for a specific period and service support thereafter.
Quite often,two important factors are missed while arriving at the cost of the product or service:
1. Cost of post sales support during the warranty period.
2. Cost of funding.
When the profitability is high, there will be comfort to provide for
◆ Growth plans
◆ Building reserves
◆ New product and market research
◆ Risks
and to build a healthy Organisation.
When the margins are lower
● The risk element is higher
● Anxiety is always in the air
●There will be hardly any provision for errors even if they are minor in nature.
● Business owners are on their toes always.
We can conclude with the strong message that higher profits drive businesses to long term growth and stability.
*Higher turnover
+
Higher Margins
=
Healthy Business*
Muralidharan Margabandhu
Business Coach/Author
It is a natural phenomenon that businesses want to grow big.
The very reason businesses are started is that the promoters are ambitious.
The challenge lies in the ambition masking the understanding of growth.
Growth can be
1. In turnover
2. In profits
We are not considering the other parameters like team, customer base, market share, etc. here, since they are all contributors to either of the above two.
*It is very important to grow the top line of every business.
It is more important to ensure that the bottom line is not compromised.*
Some businesses will have only consumables and some others products needing to provide warranty for a specific period and service support thereafter.
Quite often,two important factors are missed while arriving at the cost of the product or service:
1. Cost of post sales support during the warranty period.
2. Cost of funding.
When the profitability is high, there will be comfort to provide for
◆ Growth plans
◆ Building reserves
◆ New product and market research
◆ Risks
and to build a healthy Organisation.
When the margins are lower
● The risk element is higher
● Anxiety is always in the air
●There will be hardly any provision for errors even if they are minor in nature.
● Business owners are on their toes always.
We can conclude with the strong message that higher profits drive businesses to long term growth and stability.
*Higher turnover
+
Higher Margins
=
Healthy Business*
Muralidharan Margabandhu
Business Coach/Author
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