Do You Know When to Drive Growth vs Profits?

  • 17th Dec'20
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Growth vs Profit

It is a common tendency of a businessman to get inclined towards profit. In the short run, people tend to focus more on profit and avoid the growth factor. Growth is crucial to the long-term survival of a business. It makes it easier to acquire assets, attract new talent, and fund investments. It also drives business performance and profit. It is an important decision to work on when to drive growth vs profit.

 

Difference between Growth and profitability

Read below to know what is more important, growth, or profit:

Is Profitability or Growth More Important for a Business?

To be successful and remain in business, both profitability and growth are important and necessary for a company to survive and remain attractive to investors and analysts. To know more, read the artice:

What is more important: growth or profit?

Profitability and growth go hand-in-hand when it comes to success in business. To know what is more important: growth or profitability, click here:

How To Select The Right Strategy For Your Business

It is important to have a growth plan. If a business is not growing it is typically dying. In the current environment it is also becoming more important to have a plan to become profitable fast, if not prioritize profitability. To know more, read the article:

The battle between driving growth or profitability

It is mathematically impossible to try to maximize growth and profitability at exactly the same time. To know more about this, click here

Growth vs profitability, what’s best?

More than just a major financial indicator, the choice between growth and profitability to drive strategy gives a good indication about the mindset of the company’s top management. If you want to know what is best, growth or profit, read the article:

 

Difference between Growth and profitability

A good definition of profit is "the reward or return for taking risks & making investments".

For most businesses, making a profit is a key business objective. You also need to appreciate that profit is also the most important source of cash flow & finance for a business. However, don’t forget that there can be reasons for running a business other than “profit-making”. 

 

Growth and profit

 

Read below about the Growth versus profit matrix:

Simple growth-profit chart

If you want to expand your business, you generally have to spend money. Depending on the industry and the stage of your company, success equates to very different ratios. To know why startups need super simple growth-profit chart to be in the right direction, click here:

 

Conclusion

Profit, like the positive cash flows that it helps create, can be seen as the lifeblood of a successful and valuable business. A business that fails to achieve profit and instead suffers sustained losses will struggle to survive. On the other hand, start-ups usually need to grow to cement their position in the market and quickly get to a size that is large enough to bring in enough revenue to cover costs and begin to make a profit.

 

We, at OpenGrowth, are constantly looking for trending start-ups in the ecosystem. If you want to know any further information about the startup ecosystem, then do let us know in the comment section below.

Contributor: Amrita Sinha

Amrita is in the field of media. She has a deep inclination towards writing and public speaking. She has the aim of removing the stereotypical mindset of society. She loves to read and photography is her passion.

 

Sources/References:

*Note: The content published above was made in collaboration with our members.

About the author:

Neda Ali (Editor), OpenGrowth Content Team

The Editorial Team at OpenGrowth is working to provide you with the perfect place to know everything about startups. Feel free to connect to us.


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