Throughout my time in business, I’ve seen it again and again: business owners obsessed with boosting their sales numbers, thinking it’ll solve everything.
While sales are important, focusing on them alone is one of the biggest and most dangerous mistakes any business owner can make.
Why? Because sales don’t grow your business. Profits do.
To be clear, sales and profits are related, but a surge in sales does not guarantee more profit. In fact, in many cases, more sales can actually lead to less money in your pocket if you don’t have the right systems in place.
Every sale is earned. With more sales come more expenses, more staff, more inventory, more vendors, more overhead, and yes, even more stress. A spike in sales could make your business bigger, but that doesn’t mean it’s getting stronger.
Why Chasing Sales Could Bankrupt Your Business
The two most dangerous times for any business are its first year in business and right after a dramatic increase in sales, and the reason is simple: growth without control leads to chaos.
When your business is growing fast, you must make the transition from a scrappy entrepreneur to a full-blown manager. The most important thing you have to manage? Your profits!
Do you have a clear profit plan? Are you reviewing your margins regularly? Have you talked with a coach or advisor about how to grow without breaking your business?
Too many business owners learn this lesson the hard way. They chase sales, only to wake up one day wondering why their team is burnt out, they’re losing money, and their vendors are calling about late payments.
Think about it. What’s the point of making $500,000 in sales if you’re turning around and shelling out $480,000 to cover your expenses, taxes, and overhead?
Increased sales can be a growth lever, but only if they’re profitable sales. After all, you didn’t start your business to make a sale, only to turn around and send all of your money out to vendors, employees, and the IRS. You started your business to be profitable, right?
Without a clear plan in place, you’re going to run into massive cash flow problems and serious financial trouble. Before you know it, you’ve stopped delivering on time, your quality has plummeted, and you’ve quickly ruined your business’s once-stellar reputation.
Cultivating a Profit-First Mindset
Every year, you should ask, “How much profit do we want to take home?” Then, reverse engineer that number by doing the following:
- Pricing your products or services properly.
- Managing your cost of goods sold.
- Controlling overhead.
- Streamlining operations.
- Saying no to unprofitable work.
A roadmap should start to appear—one that you and your team can easily follow. And guess what? It might not involve an increase in sales at all!
Profit gives you a financial cushion during tough times or down periods. It allows you to reinvest in your team, your systems, and yourself. It buys you options, whether that’s hiring key staff or taking a vacation.
Want to stop spinning your wheels and actually boost your bottom line?
5 Steps to Building a Profit-Focused Business
Ready to make your business more profitable this year? Here are five crucial steps I recommend:
1. Create a Profit Plan
Set a goal for your take-home income. Then, map out the revenue, expenses, and margins required to reach that goal.
2. Track Profitability on Every Sale
Not every dollar is a good dollar. Know which products, services, or clients are actually profitable and which are draining you.
3. Measure Weekly (Not Yearly)
Don’t wait until tax season to find out you’re broke. Look at your numbers weekly and adjust as needed.
4. Cut Through the Noise
Ignore vanity metrics. Your top-line sales don’t matter. Focus on what fuels your bottom line.
5. Work With a Profit Coach
Just like a good tax planner helps you keep more of what you earn, a profit coach helps you earn more of the stuff you actually get to keep!
Remember, sales do matter, but only if they lead to profit. If your growth plan doesn’t revolve around profitability, it’s not a growth plan at all. It’s a recipe for burnout. Make this the year you go from chasing sales to building a business that actually pays you back!