Let’s shift our focus to a critical aspect: growing profit, not just revenue, my friends. It’s essential to exercise caution because businesses can inadvertently grow themselves out of existence if they solely fixate on revenue.
The “grow or die” principle impacts your business in various ways, but one mathematically significant aspect is the continuous rise in input costs. They keep climbing, my friends.
If you have a lease, those escalators are built right into it, revealing how much your rent increases each year. By the way, it’s a wise move to consider adjusting your pricing accordingly. I’m astonished by how many business owners accept price increases as a regular occurrence but hesitate to pass them along to their customers.
If your revenue isn’t growing at least as fast as your input costs on a percentage basis, there’s only one area where it will affect—your gross margin or gross profit.
Moreover, your fixed costs likely continue to escalate over time, and the only place that difference can come from is your net profit.
Allow that scenario to persist, and soon you won’t have a business to worry about anymore.
Remember, my friends, math doesn’t concern itself with your feelings; it simply provides information. It’s up to you to take action. Growing both your revenue and gross profit is imperative for a healthy, sustainable business in the long run.
And keep in mind, cost inflation is just one factor driving the need for growth.