At its most basic, profit is having more income than
expenses. All businesses are fundamentally trying to have revenues exceed
expenses. It sounds so simple, but once we start looking at profit in
real-world situations, things can get more complicated.
For family business, profit isn’t just a number – it
means we can fund the direct and indirect expenses of the business and have
some left to go into the owner’s pocket. It directly affects the lifestyle of
the family. Profit vs. no profit can be the difference between on-time mortgage
payments, college education, or family vacations – or not being able to
adequately meet family obligations.
Greater profit can be achieved by either increasing revenues
(gross profits) or cutting expenses. Expenses can only be cut so far, so how do
we increase revenues and therefore impact our cash flow?
There are two basic ways: marketing and sales.
By breaking down revenue drivers into these two general
categories, it allows us to think more strategically. Instead of asking the
general question, “how do I increase cash flow?”, we can now think more
specifically about marketing and sales goals.
If you want to know more about the importance of cash flow for your business, read more on my website!
