Focused on the Top Line Instead of the Bottom Line?
By Gail Doby, ASID
CVO and Co-Founder of Gail Doby Coaching & Consulting and Design Success University
How do you measure your business’s success? If you follow the financial news, you might assume what matters most are your revenues, the amount of money flowing into your bank account. That’s the top line on your profit and loss statement. Actually, though, what’s most important is the bottom line, the profit you end up with after salaries, taxes, expenses and other expenditures have been paid out. Without profit, you are getting less out of your business than you are putting in.
One of the best ways to increase the bottom line is to increase the top line. Bring in more business or earn more for projects and there’s more money to go around. So why not focus on the top line as the driver of your business? For two very important reasons.
First, if you focus on revenues, you can lose sight of how much it’s costing you to run your business or complete a project. I’ve worked with a number of designers who had more business than they could handle but weren’t making any money. They charged too low a rate for their services, underestimated costs and expenses, and gave away too much of their billable time for free. Their clients were happy, but at the end of the day they were hardly earning anything. The revenues flowed into the business and right out again.
The second reason is related to the first. When you focus on the bottom line, you set a target for your annual profit and work from there to determine what your fees need to be, how many hours you need to bill, and how many projects you need to acquire to meet that target. You seek out the right kinds of clients, the ones who are willing to pay for quality professional services and products. You also keep a closer eye on your time and on expenses to ensure they are not eroding your profit.
Keeping an eye on the bottom line will also motivate you to run your business more efficiently. By controlling mark-ups and productivity, for example, you can squeeze more profit from your revenues. Establishing routine procedures and policies, or delegating administrative tasks, can reduce management time and increase your available billable hours, generating more revenue without overextending your workweek.
Running a profit-driven business takes a bit more planning and attention to business details than running a revenues-driven business. But the rewards and the benefits to the long-term health of your business are worth it.