Guest post by Terry “Starbucker” St. Marie
The bottom line, that is. 
It’s easy, if you’re a business owner, to put the bulk of your efforts into generating revenue.
After all, a business doesn’t exist without paying customers, and of course, getting them in the door to put cash in your coffers is a critical first step to establishing a successful enterprise.
But once the threshold is crossed, and you’ve figured out a way to that, the real emphasis needs to (very) quickly change from the top lines of the profit and loss statement, to the bottom lines.
Profit.
Cash Flow.
If that focus isn’t there, and it’s a headlong rush for top line growth, the next thing you know is that your pretty revenue growth curve will disguise a business about to fail, and fail big.
It’s sexy to post big month-over-month and year-over-year gains in revenue. It sounds good to tell your bank and investors that the business is growing by leaps and bounds.
But if you don’t put even more emphasis on the costs involved in generating that growth, AND make sure the customers you attracted actually STAY customers, over the long haul, you stand a very good chance to crash and burn.
As a startup mentor and Angel investor here in Portland, I’ve seen this mistake made many times, and it’s a sad thing to witness, because it tends to come as a surprise.
The line I hear is “I never looked at profit, since our top line was great.”
Or they’ve chased after new sales at the top of the funnel so blindly, that they didn’t notice the customers dropping out of the bottom of the funnel due to neglect (i.e. bad service), so they ended up the equivalent of the hamster on the wheel – going like crazy, but going nowhere.
As the owner, sure, you probably have an accountant and/or a bookkeeper to keep “track” of the cash and the profits while you focus on operations and growing revenue, but YOU need to take the time to look at those books, and the expenses, to make sure that growth isn’t a house of cards.
A really good example recently appeared in the New York Times “You’re the Boss” blog, where a business owner got her “wake up call” about profit, after her hard earned revenue growth was eaten up by runaway expenses and a shady accountant.
I know, you’ve probably read articles that would suggest that revenues are king when it comes to “maximizing value” for a business in a sale situation, but when you look closer, it’s just not true.
Not all revenue is created equal. Why? Think Gross Margin (revenue minus the direct cost of producing that revenue). Dig into your books and KNOW your gross margin – by product. Know that it’s cheaper to sell more services and provide great service to an existing customer, rather than attracting and closing new ones.
Yes, a business is a race. A race to a stellar bottom line. Focus there, and win.
Terry “Starbucker’ St. Marie has leveraged a successful 23-year tenure as an executive in the cable television business into a multi-dimensional turn as a writer, entrepreneur, consultant, mentor, and angel investor based in Portland, Oregon. He is also the co-founder (with Liz Strauss) of SOBCon, a small business/ entrepreneurial conference held in Chicago and Portland. For the past 8 years he has published a popular blog on business and leadership, TerryStarbucker.com, which was recently cited as one of the “Top 30 Leadership Sites On the Internet.” Terry is an investor in the Oregon Angel Fund and Angel Oregon, a mentor for the Portland Incubator Experiment and the Portland Seed Fund, and a member of the Oregon Entrepreneurs Network.
