When it comes to growing a business, many people focus on increasing sales. But sales alone don’t pay the bills – profit does. If you want your business to thrive, it’s important to look beyond the top line and focus on what’s actually left at the end of the day.
Why profit matters more than sales
High sales figures might look impressive, but if your costs are just as high, your business may be working hard for very little reward. Profit is the real measure of success – it’s what gives you the freedom to reinvest, grow, or simply take home a decent return for your hard work. That of course, assumes that your clients are actually paying you promptly for what they owe – profit on paper is not much good if it’s not backed up by cash in the bank! Remember the old adage: turnover is vanity, profit is sanity, cash is reality!
Understand your gross profit
Gross profit is what’s left after you subtract the direct costs of producing your goods or delivering your services. These are things like materials, stock, or labour that’s linked directly to a sale. For instance, if you sell a product for £100, and it costs you £60 to make or buy it in, your gross profit is £40.
Keeping an eye on gross profit helps you understand how efficient your core business activity really is. You should regularly review your pricing, look for cost savings, and focus your efforts on your higher-margin products. It’s tempting to drop prices to bring in more sales, especially when things are quiet. But a lower price means a lower profit per sale – and you may end up working twice as hard for half the reward. Unless your costs drop too, chasing sales this way can shrink your margins and leave you worse off.
Know your numbers
One of the simplest ways to improve profit is to understand exactly what money is coming in – and where it’s going out. Many small businesses are surprised when they look closely at their figures. Regular financial reporting, even at a basic level, gives you the insight to spot leaks, adjust quickly, and make confident decisions.
Profit isn’t just about cutting costs – it’s about understanding your business and making small changes that add up over time. If you’d like support reviewing your margins, simplifying your reporting, or exploring ways to make your business more rewarding, we’d be happy to help. Just get in touch for a chat.