Chase profit dollars, not profit margins.
Dollars pay your bills not margins.
While making projections, it’s important to remember the goal of profit maximization is dollar maximization, not margin maximization.
It’s always better to get a smaller piece of a bigger pie than a large piece of a small pie.
The scale has its leverages.
In this example,
We were generating $145K in net profits with a MER (marketing efficiency ratio) of 4.
Getting it at 4 is tough.
How about lowering it up by 3.33, scaling the revenue?
We could be generating a profit of $160K.
By keeping fixed costs the same, we can increase our absolute profit.
Till the time you are covering your costs and making a profit, things are good.
But if you can scale and earn higher profits, that’s GOLD.
That’s why it’s important to run multiple scenarios before making your quarterly targets.
This kind of profit maximization needs financial discipline, thread carefully.
Again, the goal should be profit dollar maximization. Not margin maximization.