Profits vs. Growth, yes. Maximize Profits, No.

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.

profits vs. 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.


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