February 2024 Managing the Money with Ciara StockelandFeb 08, 2024
Profit Goals vs. Sales Goals
I sat down in the banker’s office across from two guys, both were wearing a suit and tie. It was a typical bank meeting. I was nervous. They were in a hurry. I had franchised my brand with over a dozen locations around the country. I was a seven-figure business owner with a corner office and a team of twelve.
I pulled out the latest set of financials and slid a copy across the table to each of the bankers present. By this time in my retail career I knew how to read the financials and I understood what the numbers meant for my business.
I had been calling bank meetings for years. Over communicating is never a bad thing. Every meeting was the same. I would bring the financials, they would glance over them, flip through the pages, eyeball the summed numbers that stood out in bold, ask me a few non descriptive questions (which I would answer), and then we would all stand, shake hands and say “See you next month”. Of course they asked about profitability, what lender wouldn’t? But the majority of the conversation was focused on top line revenue. As long as that top line number was projecting upwards, there would be smiles and nods, we would overlook poor margins and growing expense, and everyone would feel comfortable with the company happenings.
A growing top line number was everyone’s goal. Isn’t it always?
“I want to be a seven-figure business owner.”
“I am building a multi-million-dollar brand.”
“We just hit out first six figure month.”
We feel like our top line number gives us value, makes us “legit”, tells the world we have arrived as small business owners. It is all about the number at the top.
But is it?
What if it’s the number all the way down at the bottom that actually really matters? Now don’t get me wrong, bankers, friends, family… they all would say they want you to be profitable, but let’s be honest, when is the last time you heard anyone compare their profitability? I am guessing never.
It is time to focus on sales, not profits.
Constantly chasing the next sale without understanding the storm brewing beneath the surface will have your expenses following right along the with the sales, and therefore the profits will just keep shrinking.
A focus on building your goals around profitability will give you a better perspective on what is really working or not working in your business. For more info on this subject, tune into this podcast episode where I discuss building goals around profit.