By Alison Hinson
Which is more important to the success of your business - the top line or the bottom line? You can't have a business without revenue, and you can't sustain your business without a healthy and realistic grasp on expenses. This means that everyone in your company needs to understand the "other side" and how their actions impact both the top and bottom lines of the business.
In theory, this seems simple, but there tends to be a great divide in the way salespeople are viewed by the production and administrative staff, and vice versa. As the business owner or manager, you need to make sure the people responsible for the top line and the bottom line are working together for the mutual success of the company.
The Top Line (or 'You Can't Make It Up in Volume')
Every business owner and all of their salespeople should know what mix of product and services make up their top line and what price point is being quoted for each of your offerings. Your top-selling salesperson could drive you out of business if they are selling below cost in the hope that they can "make it up on volume."
You probably reward your salespeople on the amount of revenue they bring into the company. Since all revenue is not created equal, you need to start educating (and rewarding) your salespeople on the true impact of their sales. In most cases, it's not worth generating revenue that actually costs the company money (or worse, cutting prices while you promise things you don't currently offer).
The Bottom Line (or 'You Can't Cut Your Way to Growth')
You need to manage your business expenses; the trick is to know which operating expenses need to be cut and which need to be increased. Make sure your plans for revenue generation truly add to your top line (i.e. Are your salespeople making profitable sales? Is your marketing plan reaching potential clients?). Review your expenses to see if you are paying for anything you are either not using or can find elsewhere at a better price without sacrificing quality.
Provide an overview of your entire financial statement during company meetings so people see both the top and bottom lines. Talk about how a recent sale impacted the operating unit. Review your income statement and balance sheet on a monthly basis so you have a good understanding of where your business is headed. If you are not skilled in this area, hire someone who can help you learn how to read financial statements and point out where you are doing well and where you have issues.
As the owner or manager of your business, you need to know how revenues and expenses work together. Your sales people need to recognize the bottom line impact of each sale they make, and the people producing your product and dealing with administrative tasks need to understand and appreciate how important each sale is to your business. Both parts of your income statement need to be strong and in sync to create a successful business.