Beyond Revenues: Why Companies Should Prioritize Profitability
Why Focusing on Profits, Not Just Growth, is Essential for Long-Term Success
In the era of cheap money, it was easy to get caught up in the allure of rapid growth and expanding revenues. After all, high revenues suggest that your business is doing well and expanding its market share, right? Not necessarily. In fact, many companies are finding that chasing revenues can be a costly mistake, especially in today’s world of interest hikes and inflation. Instead, companies should shift their focus to profitability if they want to thrive in the long term.
Profitability is the key to sustainable success. While revenues can fluctuate, profits are what keep your business running and enable you to weather economic storms. But what does it mean to prioritize profitability? It means that instead of simply striving to increase revenues, companies must focus on reducing waste, cutting costs, and optimizing their operations.
When you’re able to operate more efficiently and effectively, you’re better equipped to compete in the marketplace and weather economic storms. During times of recession or market upheaval, companies that prioritize profitability emerge stronger and more resilient.
So, where do we look?
The first lever that impacts your business’s profit is the workforce.
Do you have the right number of employees?
It’s obvious to look for places to cut employees to save on labor costs, but many organizations overlook the value of adding employees to increase profitability. A firm understanding of your processes and associated costs will give you a clear ROI on adding employees (or robot employees) to boost productivity and profits. Even when times are tough, don’t be afraid to add if the numbers make sense. This means you need to understand your systems and processes.
Are your employees properly trained to perform their roles successfully?
Subpar training can lead to subpar performance, which leads to wasted human capital. It’s essential to invest in training and development to ensure that your team has the skills they need to perform at their best. Identify top performers, determine what makes them “tick” and if it can be replicated, and apply your learnings to coach up lower performers.
If a team or a group of individuals is underperforming, it’s important to look at all the variables that influence this, and not just their pure talent levels. Inspect what you expect.
You know who but do you know what? You need to know what your employees are doing and how they are doing it.
Processes that are not optimized can produce revenue but may not be profitable. How? By having repeated, unnecessary tasks throughout a process.
Take a deep dive into your processes and identify areas where you can streamline and improve efficiency. Removing unneeded steps is addition by subtraction or spending an up-front cost to automate systems can result in long-term savings and profit growth. If you want a way to streamline decision-making processes, you can learn more here.
Recommending to make additions right now is going to be a lonely place, but leaders who invest in the right processes now to build the foundation will reap the rewards during the next economic upswing.
You have who, you have what, now you need how. What tools are you using and is the cost justified?
Make decisions about tools based on actual numbers and ROI, rather than just a “cut, cut, cut” mindset. Understanding what tools you have, how they’re being used, and if they can be cut is critical.
This is where artificial intelligence (get used to us talking about AI, it isn’t going away) can come into play. AI can help you analyze data and identify areas where you can optimize tools and processes to improve profitability. There is a wide array of automation tools like RPA solutions on the market to help you supercharge efficiency. If you’re unsure which solution is the best for your situation then let us know, we’re happy to help.
Inspecting your people, process, and tools identifies areas where your business is wasting money and improves your bottom line. Instead of chasing after revenue growth, focus on building a strong foundation of profitability. With the right approach and mindset, your business can weather economic storms such as a recession, and emerge stronger and more resilient than ever.
What are you seeing in your market? Respond and let us know! If an inspection of your organization doesn’t produce paths to pump profits then there is work to be done and we can help you get there.
Let’s get to work.