Top-line vs. bottom-line growth: You’ve heard these terms a lot as an entrepreneur, but have you ever really taken the time to understand what they really mean for your business and why you should focus one or the other depending on your current situation? Those are important issues to address. Have you?
First, let’s get clear on definitions. Top-line revenue is the revenue generated by the company. We often call this “gross revenue” -- the amount of money we have before any expenses are deducted. Bottom-line revenue, then, is the income that’s left after all your expenses -- loan repayments, interest, administrative fees, taxes, payroll, etc. -- have been met. Obviously, there could be quite a difference between top- and bottom-line revenues.
When I first got started in business, I thought bottom-line revenues were all that mattered. Who cared what the top-line number was if, at the end of the day, my bottom-line number paled in comparison?
I was dead wrong.
Here’s why:
When you focus only on your bottom-line revenues, you completely neglect to focus on growth. Why? Because the obsession over how much money is left at the end of the month or year keeps you from spending on things like marketing and new hires because, in your head, that’s all too expensive. In other words, you can’t see the potential long-term benefits of investing in growth strategies because you’re blinded by short-term numbers.
In reality, when you focus on long-term gains and improving your top-line revenues, you start investing in the things that will really increase your profits -- getting more clients, more sales, hiring the best people, and so forth.
Now, please don’t take this as advice to spend wildly without thought. Obviously, you need to handle your financials and not get yourself into trouble.
What I am asking you to consider is this: Would you rather run a company that brings in $2M in top-line revenue with 10% bottom-line revenue, or a company with $300K in top-line revenue and 40% bottom-line revenue? The difference at the end of the day is huge.
In general, too many executives look at short-term gains and how quickly and easily it would be to exit their business and make a buck. I’d much rather think long-term and plan on building a business that will live on without me.
Which strategy do you prefer?
As part of our value-added services, BGW regularly holds networking and educational events. This week, we welcomed an expert panel comprised of CEOs who have driven top-line growth in their own companies and who now seek to share their experience with like-minded entrepreneurs. Our guests included Tana Greene, CEO of My Work Choice, Brandon Lindsey, CEO of Dream On 3 & VP of Ops at Hoopaugh Grading, Brandy Milazzo, Founding & Managing Partner of Milazzo Webb, and Charlie Malouf, CEO of Broad River Retail d/b/a Ashley HomeStore. Over 40 guests filled our community room for networking, breakfast, and this informative seminar.
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Are YOU ready to move forward with a different kind of CPA firm, one dedicated to the growth of your business and not just the reporting of your numbers to IRS? Give me a call.