Which is preferable – Revenue or Profit?

If you ask an Entrepreneur whether he/she would prefer growth in Revenues or Profits, the answer would probably be – both.

However both might not be possible for Entrepreneurs in growing companies. Depending upon the stage of growth of a company, there is a potential for a Catch-22 situation. If I have profits, I can have internally generated cash to invest in growing the top line. Or, if I had more Revenues, I would be able to squeeze out more profits due to certain economies of scale.

Choices have to be made at different stages of growth as to whether Revenue or Profit is more important to focus on. These choices would most probably change over time.

However, have you ever thought about what is better in the long-term – growth in Revenues or Profits? You might be surprised by your quandary!

Ravi Patel

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Trust, but Verify

President Reagan has been attributed with this famous philosophical statement in connection with the nuclear arms treaty with the old Soviet Union.

What can Entrepreneurs learn from that?

As Entrepreneurs start building a solid leadership team for growth, they have to rely on and trust their key management personnel. But is that enough to ensure superior performance and growth?

While trusting the leadership to do the right thing, the Entrepreneur must also oversee the building of management reporting systems that independently verify the progress made by the company in established metrics. Such systems should have checks and balances to ensure that verification can be relied upon.

Trust is essential, but verification is paramount for long-term success. This is similar to a previous post on People or Process Dependency. Trust is people based; verification is process based.

Entrepreneurs, trust your people but do have verification systems in place.

Ravi Patel

You Can Improve Only What You Measure

Entrepreneurs might have heard this expression before. What does it imply?

As discussed often in this blog, implementing solid business processes is crucial for superior performance and growth. But, how does one know that the processes are continuously improving?

Do you have metrics in place to evaluate how well the processes are functioning? Have you identified and picked the relevant metrics? Are the measurements timely and widely communicated? Do you analyze the results and brainstorm ways to further improve the procedures?

If Entrepreneurs do not have effective measurement systems for their business processes, it will be difficult to analyze and improve your performance.

Ravi Patel