Top Line Revenue Drives Bottom Line SuccessPosted on January 30th, 2020
In most areas of our lives, it’s easy to see how our investments of time, energy, and money create value over the long term. Consider the expense and exhaustion of raising small children, and the joy we receive from watching them grow and learn! But for some reason, it can be difficult for small business owners to take the long view when it comes to growing their company.
Often, this is the result of an intense focus on the bottom line. A healthy bottom line is vital to any business, but we can’t lose sight of the additional factors that will contribute to our long-term success. It’s important not to sacrifice the bottom line with frivolous spending – but some areas of investment, such as marketing or personnel budgets, are what drive top line growth and ultimately increase profits. Let’s take a closer look.
Understanding Top Line Revenue
First, a quick refresher for those of us who aren’t so financially minded. Top line revenue, as the balance explains, “refers to the money a company generates by providing goods or services to its customers.” That’s your gross revenue, or simply how much money is coming in the door. Bottom line profit is the figure you get once you’ve deducted all the expenses involved in making that money. That’s your net profit, or “profit after all expenses, taxes, interest, and other costs have been paid, depreciation estimated, and the books closed.”
It makes sense to prioritize the bottom line. That’s how much money you ultimately made. However, most owners distribute out their earnings instead of investing a healthy portion of them into their future growth. Don’t lose sight of the big picture and the potential investments that could catapult your company to a higher level of success!
Focusing on top line revenue means focusing on growth. When we look for ways to increase the top line, we’re able to prioritize our potential and make investments that lead to expanded opportunities.
Taking the Long View
Too many entrepreneurs deprive themselves of the ability to innovate, invest, and grow by stockpiling profit rather than investing some of it. Instead, take the long view. For example, increasing your marketing budget now will result in snowballing sales over the long-term. If you invest in building your client or customer base, increasing your sales, or hiring a consultant or staff member whose skills can help you grow, your bottom line may decrease in the short term. But, those initial expenses will pay off in the long term, earning back your investment and contributing to your bottom-line success for years to come.
The truth is you have to spend money to make money. Studies demonstrate that entrepreneurs and business leaders often regret not spending more on marketing early in their development. In Entrepreneur, Chief Revenue Officer Victoria Treyger notes that “On average, marketing/advertising spend is companies’ smallest expense each year. However, marketing is a key investment for any business, and many wish they’d invested sooner.” Effective marketing investments are one of the fastest ways to increase top line revenue and ultimately grow the bottom line over the long term.
Be smart, of course! Look at your financials and create a budget that allows you the freedom to invest in new growth strategies – and then stick to it. A budget gives you something to strive for and establishes healthy parameters for your expenses. You can always pull back your spending if it becomes necessary, but when you don’t invest in growth, growth doesn’t happen.
Invest in Your Success
As e2E’s Marketing Practice Leader, my commitment is to our clients’ growth. I bring years of experience as an entrepreneur, marketer, and communications leader to the table to help you develop strategies that lead to top line revenue and bottom line success. If you’re ready to invest in your success, contact us today!