Understand the inherent tradeoff between profits vs. growth. I’m struck by how much business writing and thinking takes optimizing profits as the objective. Maximize your profits. I disagree. Usually the optimal is not maximizing profits, but rather maximizing the value of the business, which often means a balance between profits and growth.
In general, a dollar of profits is a dollar that wasn’t spent on growth.
Obviously, no general rule is always true. There will always be exceptions. But profits generally — although not necessarily — leave the business instead of being reinvested in growth, as expenses. Expenses to build better products, better services, better marketing, a better long-term future. Balance your profits vs. growth.
Every dollar of profits could have been spent on better product or better marketing instead.
Comments