Jump-Start Profit Tip of the Week: Growing Sales Doesn’t Automatically Increase Profits!

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Growing sales is the main goal of almost all business owners. Most business owners think that more sales will be the answer to all their cash flow problems. The problem is that more sales do not automatically equal higher profits. But, when you increase sales some things are guaranteed to happen:

  • More customers equal more vendors and more payables.
  • More customers equal more employees.
  • More customers equal more headaches.
  • More customers equal more risk.

Success_failure There are two main times when businesses end up filing for bankruptcy – in the first year of existence and shortly after they have a dramatic increase in sales. For businesses that sell a product, this happens about the time their sales hit the million dollar mark and their staff grows to about ten employees. Service companies hit the wall around a quarter million in billings and around five employees.

What happens at these points is that the owner no longer can keep a handle on everything like they could when they were smaller. If they have not setup proper management and accounting systems they can easily run out of cash.

This transition from being an entrepreneur to becoming a manager is one of the hardest to make. That is why less than 2% of startup companies grow to these levels and why so many companies fail to survive.

What are you doing to avoid “hitting the wall”? Are you educating yourself by reading as many business books as possible? Are you looking for a trusted business advisor to help guide you through this treacherous time? Or are you just ignoring the problem and trying to sell more so you can grow your way out of it?

Remember the choice is always yours!

Thank you for your continued support and let's make this year our most profitable year ever!