Peter posted this on October 19, 2014
I started tracking my Business numbers seriously this year (I know it’s been long due), so far, the business has been self funded and growth has been decent for that.
I’ve noticed something in the course of doing tracking the numbers.
It appears there is a balancing game between making profits and speedy growth.
There are growth targets I set and in meeting these, We’ve to spend more of the gross profits on promotion/advertisement. This usually means in the short term, we end up in the red, net profit wise (cash flow is healthy so no pressure).
I’ve also seen that where I try to optimize for a net profit (I need dividends to add to my minimum wage 🙁 ), that means cutting of costs and since I’m already a brutal cost cutter, the advertising budget ends up a victim meaning opportunities for growth might be stifled.
This is an interesting thing I probably would never have noticed if I didn’t decide to pay attention to the numbers.
We could make profits now and have fun but end up with a small profitable operation long term (which wouldn’t impress me) or sacrifice profit now for growth so there is a larger business to make profits more from in the long term.
Maybe finally get external funding to cover the shortfall when investing aggressively in growth?
I know life isn’t linear so this shouldn’t be that linear either.
Just some late night thoughts.
There Are 2 Comments
05 Feb, 2022
This delicate balance between optimizing profits and chasing growth is so important.
It is one of the key things I’ve learnt to look out for in investing. Companies that focus on short term profits or payment of dividends often do so at the expense of long term growth/ profits…
Thanks for sharing your thoughts about this. It is relevant today and will still be tomorrow…
06 Feb, 2022
Thanks for your comment,
I’d to re-read the post it’s been years and still as true as it was.
The age-old analogy between delayed and instant gratification.
Thanks for stopping by!