Over the last 2 years I’ve spoken at events talking about how businesses need to move past the idea that sales and success are the same thing. That came home today after a phone call with a leading national publication.
Digit was shortlisted for an article profiling high growth businesses and discussing their secrets to success. They were interested in discovering companies who were fast growing, used technology, developed a strong culture, and were happy to share. A perfect fit for us, and our mission of helping other businesses succeed.
When it came down to who would get the nod, the lead editor chose to ask a single question – “what is your turnover?”. The interesting thing with that question was the followup statement – “we want to make sure that the company we profile is successful enough“. That was it. And there it was.
It’s a misconception in our society that sales is the best indicator of success in business. It’s the same myth that sees us celebrate high turnover businesses, without giving equal weighting to the body of work, sustainability, or what the owners and shareholders get out of it. It’s the same fallacy that inspires people to start a business, after working for someone else, seeing what they are being charged out for, and thinking “I could do this better, myself”. It’s a flawed understanding of what underpins success.
Sales as an indicator has its place. It demonstrates demand for the products and services – it illustrates that the business has value in the market. When you think about it though, sales growth is a better indicator that the business is on the right track. it shows whether the business is growing or declining. Whether the market still values their product, and if they are consistently delivering on their business promise. But neither accurately demonstrate whether the business is healthy, or sustainable.
Think about it. Is it possible for a business with consistent sales to fail? It certainly is if after all the costs and overheads of running the business are taken into account, it isn’t turning a profit. All that effort without a net gain. A business that makes a consistent profit has the ability to choose whether to invest in assets to generate further income, reduce debt or other liabilities, or draw money out of the business and reward the owners.
Yet a profitable business can also fail. 65% of business that are insolvent are profitable – they fail because they haven’t managed their cashflow. What good are paper profits when you no longer have the ability to pay your bills as and when they fall due.
The point I’m making here is that it’s time we evolved the conversation past celebrating sales figures. Past the one-dimensional view that a bigger topline is better. It’s time we asked – what is a better measure of success in business?
For me personally, it’s about the impact the business has on the economy, how well is it managed, and where is it going. How many people does it employ? What is the strength of its balance sheet? What is its culture, vision, and mission? What I want to know is whether the business will be around for years to come, making a positive contribution to the world we live in.
Wouldn’t that be a better measure of success – and a target for all of us to aspire towards?