Many businesses are obsessing about revenue growth to a potentially unhealthy level, a finance broker has suggested, without having due diligence over other important numbers.
“I think there’s a lot of focus about revenue, revenue, revenue and a lot of people focus on, ‘I’ve got to get to X amount of settlements’, and by doing so, they increase their expenses, not realising that profitability is actually affected,” explained Nancy Youssef of Classic Finance in an episode of the My Business Podcast.
“And sometimes, even in speaking with very successful brokers, they’ve said to me, ‘Look, settling $20 million a month is not more profitable than the guy down the road that’s settling $5 million a month and doing that with one admin staff’. So, I think certainly being aware and knowing your numbers is really important.”
While Ms Youssef was speaking about the finance and mortgage brokers that she mentors through her sister business Classic Mentoring and Coaching, the same principle applies to SMEs more broadly regardless of industry.
Coping with the biggest fear in business
But while revenue growth, or a lack thereof, is a fear common to many business owners, by far the biggest fear, Ms Youssef said, is cash flow.
“Especially in an SME, cash flow is king and it’s a fear that I see here,” she said.
“We all experience it... so, it is a real fear, it is a reality in business. You’re going to have your good weeks, your bad weeks.”
Again using broking as an example, where brokers are paid by lenders once a loan application is approved and completed, Ms Youssef said that long lead times between meeting with a client and actually getting paid can create very painful cash flow concerns for business owners.
“It’s really important to have money for a rainy day,” she said.
“So with the good months, you’ve got to try and be able to plan for some of the downturn.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.