Focus On Profits Not Revenues!

 

At some point every business risks falling into a Black Hole.  A black hole is when a firm’s revenue first surpasses €100,000 and there’s an increased demand for staff but not enough capital to pay for new employees. If you want to escape the black hole you have to aim for    10 to 15 percent pre-tax profitability. To put it another way getting through a black hole is like driving from Donegal to Kerry. Even if you fill the tank from the start  if you guzzle fuel too quickly without adding more as you go (or if you incur losses but don’t build profits as you grow), you’ll never make it to Killarney!

 

That’s precisely why your goal should be to accrue healthy profits while you grow. Focus on profits. By reinvesting profits and building your capital reserves you’ll make it through that black hole. The benefits of being profitable while you’re in a black hole don’t end when you get out of it. If you decide to sell your business, historical profitability will have a significant effect on your company’s value. Prospective buyers will want to see your last three years of pre-tax profits and business equity (a widespread measure used to gauge a company’s value).  As a result a company that has achieved 10 to 15 percent pre-tax profitability will have a substantially higher market value than another firm with smaller profits or none at all. After all every business owner wants to achieve the best optimal market value for their company (whether for sale or IPO).

 

Contact Us at Avid Partners on 0818 303087. Email us at advice@avidpartners.ie. We love to hear from small businesses and how they are doing! We can help you focus on profits!

 

Extracts from Simple Numbers, Big Profits. Blinkist Blog

 

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Yes Avid Partners have two divisions of the company. We have an accountancy division that handles your day to day financial necessities and we also have an advisory division to assist companies develop their businesses. This can include consultancy, marketing and guidance when required. We can act as a Chairperson for your organisation if required and can also take away some of the day to day pressures that can restrict growth and slow development. Avid Partners can help with both of the critical aspects of a company, keeping costs down as much as possible and growing revenues exponentially. Technology companies need patience in developing their visions and an involved day to day partner is the best way of keeping a good business balance.
It is a common problem for companies who are in a situation where their business is growing in real terms (users, visitors) but sales is not matching the other growth metrics as traditionally sales lags behind growth (Twitter, Linked In, etc). So what do you do? Every business needs access to finance to pay operating costs which gives the company time to develop future revenue streams. Thankfully the situation is getting better with many tech friendly finance options coming on stream such as micro financing, crowd funding and government agencies are also starting to show support interests.
Every company starts out small with very limited resources at the beginning of the project. The key is to make the most from the resources you have and to seek out alliances, support systems and working partners. Start ups face many challenges including access to capital, regulatory requirements, economies of scale. We can help you develop your concept and will assist in every way possible from accountancy and day to day support to advisory services and raising finance. We can assist in a number of ways and have a portfolio of growing small companies that we help on an on-going basis.
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