- Use the “Rule of 45.”
- Stop Focusing on Profitability and Go for Growth
- GROWTH & PROFITABILITY CONSULTING
- Balance Growth vs. Profitability With These 4 Tips
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- Balance Growth vs. Profitability With These 4 Tips.
Login Newsletters. Business Business Essentials. Compare Investment Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Related Articles. Partner Links. So if the bee girl is your customer, and your brand is the dance — how do you get things moving? To truly connect, brands need to put in the effort and cultivate a two-way relationship with customers, beyond the typical social media channels.
Use the “Rule of 45.”
The reward? A profound and now quantifiable link to growth. Thought leaders like C Space hosts , conversations a day between brands and their customers , extracting innumerable insights along the way. What does it all mean?
Stop Focusing on Profitability and Go for Growth
Be it brand or bee girl, being empathetic, open, and showing genuine interest builds stronger relationships. Done well, there may also be dancing. Sign in. Get started.
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What the bee girl knew — brand leadership in the Age of the Customer. Anthony Cospito Follow. Inspired by the human experience at the nexus of culture, technology, branding and biology. Also, pizza. Where do you fall right now on the growth vs. Many CEOs will push growth at all costs. After all, high-growth companies are often dramatically more valuable than slower-growing companies in the same industry.
However, if as revenue grows profit margins become negative, the CEO may be driving the company toward a death-by-growth experience. On the other hand, focusing on profitability by limiting expenses can lead to stagnation. Whether you are focused on growth or profitability , you must know when and how to build each into the culture and operations of your company.
GROWTH & PROFITABILITY CONSULTING
Here are four steps to balance both. Is it to maximize revenue or hit a certain level of profitability? Or is it a bit of both? CEOs of different companies will have different answers to this question. For privately held companies that are supporting their owners, maximizing cash flow may be the overwhelming goal. If you are focused on growth and are operating at a loss, you should have a clear plan and potential timeline for heading into the black. Public companies will be focused on maximizing the share price, which often means trying to positively position the company in either growth or profit against others in the same industry.
While this is just a rule of thumb, it is surprisingly valuable in thinking about balancing growth and profitability. At one extreme it means that if you grow at a rate north of 45 percent, you can break even or actually operate at a loss and still be rewarded in the market.
Balance Growth vs. Profitability With These 4 Tips
On the other end of the spectrum, if a company is not growing or is growing slowly, it needs an operating margin north of 45 percent to achieve a high valuation. High operating margins are very tough to obtain and even tougher to maintain over time. This is just one supporting point for the idea that companies cannot stagnate for very long and remain valuable or relevant. Use the Rule of 45 as a simple way to benchmark your business against the best in the world.
If you are striving for a certain growth rate, consider how that might affect your operating margin. If you are striving for a certain level of profitability, consider how that might affect your ability to grow.