Why Growing Your Revenue May Be a Bad Idea

I was having lunch with a very successful entrepreneur the other day. He told me a few years back he had 100 employees and now he only has 25. When he told me this was on purpose, I obviously had questions. He told me that his profit margin with 25 employees is much higher then when he had 100. Many times entrepreneurs are so focused on the top line revenue that they forget that the bottom line is really what matters. It was refreshing to see such a successful entrepreneur realize this and make such a radical but necessary adjustment.

I have a feeling that many times ego plays a huge role in this equation. We all want to build these huge companies and be the big bad entrepreneur. While there is certainly nothing wrong with this, many times it is at the expense of our bottom line.

As we continued our conversation, he told me about another entrepreneur who ran his own company. Their annual revenue was close to $150 million and the owner was getting a paycheck of $300,000. I couldn’t believe what I was hearing. Don’t get me wrong, $300,000 is nothing to joke about but you can make that much money with a million dollar company! At that size I would have guessed he was making well over a million dollars. Clearly he was focusing solely on growing his top line revenue (which he did quite well) but lost sight of how much he could ultimately take to the bottom line.

I have this exact conversation with people multiple times every week. Too many entrepreneurs are so focused on growing their sales that they do so at the expense of their profits. Many times this simply comes down to not having the proper financial information they need. It is so important to keep accurate financial records. Not only that, you need to make sure you have someone in your corner to interpret what the numbers are saying if you aren’t 100% sure.

I can’t tell you how many situations I have seen over the years where companies take on huge $ value projects but are ultimately losing money. Sure, getting a check for $200,000 feels great but if your costs are $300,000, should you be taking on a project like that?

Whether you do it yourself or work with someone outside your company, make sure you have the financial information you need at all times. If you need certain reports or want to see certain information, don’t settle for not getting it. Having the proper accounting infrastructure will pay for itself many times over. It will allow you to make much more informed decisions and ultimately increase your bottom line.

If you aren’t getting the financial information you need in a timely fashion, its time to make a change. We can obviously help you but whether you work with us or not, this is crucial to the success of your business. I will put the link to our price tool below in case you need some help but please don’t sell yourself short when it comes to this area. Have a great weekend!

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