What Profit Growth Really Means: Beyond Sales and Revenue

Growth can be in the eye of the beholder. Not the D&D beholder, but the individual. Most people associate growth with more money–more money for them, more money for the business. Maybe it’s growth in sales volume (units sold) which leads to money. There are a lot of ways someone might define growth for themselves but for the sake of conversation let’s think of it as money.

What kind of money though?

Are we talking about your personal money? Are we talking about revenue? What about profit? What is profit anyway?

Lots of questions.

Profit in its simplest form is how much money is left over when you sell something.

You make red dragon pacifiers named Lloyd for babies (that’s what I named our dragon anyway). You sell them for $3. If you sell one Lloyd, you get $3 in revenue. In extremely simple terms, if it costs you $1 to make Lloyd, you have made $2 in profit.

$3 (Revenue) - $1 (Cost) = $2 (Profit)

Great.

So what is most important for “growth”?

In this scenario, if you grow your sales, that translates to growing your revenue, which means your profit goes up. 

That seems easy enough.

Let’s move the numbers around.

What if your sales price is $2, and your cost is $3. That means you’re losing $1 on each Lloyd sold.

$2 (Revenue) - $3 (Cost) = -$1 (Profit)

What does growth mean here?

The more we sell, the more revenue we make (yay growth!) – BUT the more money we lose (waitaminute).

So what matters with growth?

Our last example tells us it’s probably not just Revenue. It also tells us that we shouldn’t think of it purely through the lens of sales volume either. The two are often synonymous because sales volume translates into Revenue directly.

If it’s not Revenue or sales volume, and not many people would think about growth through the lens of Cost, but what about Profit?

Profit growth is really what’s important. If you focus on Profit, the rest will figure itself out. If your product is profitable you can increase sales volume, you can drive Revenue, and profit will go up. If you reduce costs, profit will go up even if sales remain steady.

Profit growth then is the key.

That’s why understanding your cash flows is so important. That’s why knowing which products drive your profit is so important. That’s why I work in those two areas of focus. Understanding both your cash flows and your products gives you an incredibly strong foundation for making informed decisions about how best to grow your company.

If you want help with either of these things, or you just want to talk about what growth means for you and your business, please don’t hesitate to reach out.

PS: Have a burning question or a challenge you’re facing in your business? Drop me a message, and not only could I answer it in an upcoming post, but you’ll get my personal insights to help you solve it faster!

Interested in working together? Here’s how to get started:

• Ready to accelerate your business growth? Let’s chat. Schedule a call via my website, and together we’ll uncover your business challenges and the first step toward the results you want.
• We get to know each other a bit and you tell me about yourself, your business, and what your current challenges are
• Want to dive deeper? Book a 60-90 minute intro coaching session, where we’ll work on a specific challenge or opportunity in your business. It’s a low-risk way to experience personalized coaching and get actionable next steps.

Bonus: Looking for an actionable roadmap to grow your business? Don’t miss out on my 3-step process, designed to help you accelerate business growth. Get free access today—clicking here.