Growth vs Profit

As this article says, every business owner struggles with the profit vs. growth conundrum: When is it best to prioritize lean operations to maximize profits and cash flow, and when is it necessary to prioritize investing heavily in infrastructure to support future growth, even if it means sacrificing immediate profits?  The key is to avoid casually floating between these two extremes, but to be very conscious of which decision you have made and manage very deliberately toward that goal.

Profit Maximization – If you are focused on cost-cutting to boost profits, you will:

  1. Focus on efficiencies and finding the best way to stretch every penny;
  2. Pause any further investments in your infrastructure; and
  3. Institute a hiring freeze, hoping your existing staff can adequately serve clients and onboard more.

Growth Strategies – If, on the other hand, you decide to focus on growth and forsake profits, you will:

  1. Recruit new employees that can support the surge in new clients;
  2. Invest in technology infrastructure to better support the business and allow employees to service more and more clients; and
  3. Increase office space to accommodate all these new employees you are hiring.

It’s healthy to occasionally take your foot off the growth pedal and focus on cash flow. As industry icons Warren Buffet, Ray Dalio, and Jack Welch have all famously touted, “Cash is king.”  Having cash on hand allows businesses to weather any financial storms and make strategic acquisitions when opportunities present themselves.

July 24, 2024