Entrepreneur Dorry Kordahi on why you should focus on profits, not revenue
Businesses shouldn’t chase revenue and ignore solid profits, however tempting it may seem. Concentrating on revenue is vanity, not sanity.
In business, doubling, tripling or quadrupling revenue in a short space of time does happen. It just doesn’t happen very often.
In our globally connected world, we’re constantly exposed to news of companies breaking records and leaving their competitors behind. And they achieve staggering revenues because they have created an innovative product or service.
Think of companies such as Alibaba, Netflix, PayPal, and that elder statesman of tech Facebook.
These companies’ mouth-watering revenues are simply a byproduct of delivering products and services that are superior to that of their competitors.
Often, they’ve raised equally staggering amounts of money from institutional investors whose job, in turn, is to make money work for their clients. These investors will back a market spread of risk categories and look at the overall yield on that spread. Essentially, they are gambling on a calculated portfolio to achieve an overall return.
It’s important to remember most of the money in these companies comes from investors. Something goes wrong and the chief executive officer still gets paid.
In the everyday fields of business-to-business and business-to-consumer companies, these sorts of revenues just aren’t the case — and neither is meeting those investors whose watches cost more than most people’s cars.
Everyday business life is hard work and it can carry a lot of personal risk. Owners of small private companies generally use their own money. They don’t walk away from a collapse with a massive golden parachute; generally, the banks take their homes.
That’s not to say rapid revenue growth can’t come to everyday companies. It can — if they are the first to identify a trend and take it to the marketplace before anyone else.
Remember fidget spinners? These were something I identified as a perfect ‘hot trend’ for the promotional merchandise industry. The trend lasted just a few months, but my revenue grew during that period.
Of course, they haven’t disappeared from the market, but they’re not ‘hot’ anymore. Any company that reacted too late to this trend is probably sitting on a lot of unsold stock, or they missed out on a great opportunity to increase their revenue
That’s why basics are so important. Constantly being proactive regarding the needs of your clients makes a supplier as near to indispensable as is realistically possible. As a result, revenue grows in proportion with trust and service. Better still, it costs nothing.
Vanity, not sanity
These are things I believe in and have put into practice in my own businesses in order to create an indispensable service environment for clients.
As a businessman, my focus has always been on profits, rather than revenue.
Companies shouldn’t chase revenue and ignore solid profits, however tempting it may seem. Concentrating on revenue is vanity, not sanity.
Companies have to be proactive with solutions and service, then winning and keeping market share. When a company does the right thing by its customers and it does it quicker, better and cheaper than its competitors, why would its customers even think about going anywhere else? It doesn’t make sense. Get the foundations of a company right and revenue will grow.
Then, by keeping costs focused and tight, profits will grow exponentially.
Remember, pass savings on to your customers if you can and if you are ready. Keep control of, and expand, your market share and act when you are ready, not when you are forced to.
Work smarter not harder, target profit not revenue, and you will see your company grow and prosper.
