Nearly every day, financial gurus analyze and often over -
analyze the performance of a wide variety of business organizations. We
often hear these individuals discuss an organization's performance in
relationship to what are generally referred to as expectations. However,
since businesses almost always either under or over perform in
relationship to these expectations, an objective observer should realize
and understand that there is a significant difference between
expectations and facts. In addition, in many cases, there is far too
much attention paid to gross revenues, when a company's bottom line is
more dependent on profitability, which is the difference between
revenues and expenses. When you invest money, are you looking at the long - term profitability, which will eventually create higher stock prices (in the long - term, but not necessarily immediately), or do you become excited by the hype created when a company's revenues increase, even if it is not accompanied by an increase in profits? Those selling their homes, must consider their personal needs, and not become overly dependent upon what they initially paid (do they consider other costs), opportunity costs of money, and their personal needs. While revenues might often be a somewhat relevant indicator, you must understand that their context, and especially, the bottom line, is far more important!
1. When company's prioritize revenues, they often do so at the expense of their bottom line. They do so because if these revenues come about because of ever - increasing costs such as materials, marketing and labor, the organization often does not benefit. The reality is often that, especially in more trying economic times, being overly sales oriented without paying sufficient attention to costs, diminishes and adversely impacts the bottom line. When a Realtor markets a house, does he consider how much time, money and other resources he expends, before merely celebrating the commission made. When these factors are understood, what might be initially viewed as a large fee, is realized to be, far less, in real terms!
2. Often, it may be easier to address controlling costs than increasing revenues. This can be achieved by a combination of factors, including spending more efficiently, being more effective, wasting far less time, and creating a strategy that objectively looks at the relationship between costs and revenues. No one can accurately see into the future, and thus, addressing expenses is often far more reliable than forecasting increased receipts. However, management must take care not to overreact and take draconian measures when more moderate, fiscally responsible approaches are called for.
3. The key to a business' success is their bottom line, not simply in the short term but into the foreseeable future. This means addressing all expenses and examining if one gains the most bang for the buck. Management must be careful that they do not cut the wrong expenses, but merely reduce the bloat, inefficiencies, and seek better and more efficient alternatives. Smart executives generally begin by utilizing a carefully prepared, organized and realistic zero - based budget, that is used as a true planning tool. Sometimes, draconian cuts will address the short term fiscal picture, but if done without planning and foresight, will often adversely impact the long term picture and performance.
Success is not based merely on how much revenue might be brought in, but rather the amount, degree and consistency of the profits. Smart business managers and leaders are far more concerned about profits and sustainability, than they are solely about revenues alone.
1. When company's prioritize revenues, they often do so at the expense of their bottom line. They do so because if these revenues come about because of ever - increasing costs such as materials, marketing and labor, the organization often does not benefit. The reality is often that, especially in more trying economic times, being overly sales oriented without paying sufficient attention to costs, diminishes and adversely impacts the bottom line. When a Realtor markets a house, does he consider how much time, money and other resources he expends, before merely celebrating the commission made. When these factors are understood, what might be initially viewed as a large fee, is realized to be, far less, in real terms!
2. Often, it may be easier to address controlling costs than increasing revenues. This can be achieved by a combination of factors, including spending more efficiently, being more effective, wasting far less time, and creating a strategy that objectively looks at the relationship between costs and revenues. No one can accurately see into the future, and thus, addressing expenses is often far more reliable than forecasting increased receipts. However, management must take care not to overreact and take draconian measures when more moderate, fiscally responsible approaches are called for.
3. The key to a business' success is their bottom line, not simply in the short term but into the foreseeable future. This means addressing all expenses and examining if one gains the most bang for the buck. Management must be careful that they do not cut the wrong expenses, but merely reduce the bloat, inefficiencies, and seek better and more efficient alternatives. Smart executives generally begin by utilizing a carefully prepared, organized and realistic zero - based budget, that is used as a true planning tool. Sometimes, draconian cuts will address the short term fiscal picture, but if done without planning and foresight, will often adversely impact the long term picture and performance.
Success is not based merely on how much revenue might be brought in, but rather the amount, degree and consistency of the profits. Smart business managers and leaders are far more concerned about profits and sustainability, than they are solely about revenues alone.
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