The Bottom Line: It's Important
April 29, 2013
When you hear leaders say that a new strategy is going to improve the bottom line, they are talking about net profit (sometimes called net income or net earnings) - because net profit is generally the last line, or the bottom line, on the income statement. Net profit is simply all revenues/sales minus all expenses.
So there are two fundamental ways to improve the bottom line: increase revenues (sell more) and/or reduce expenses (spend less). That sounds pretty easy - and sometimes it is - but more often than not strategies based on either of these goals can be difficult to execute and can have unexpected results. For example, sometimes increasing revenues requires making investments that might not earn a return in the near future - or at all. Likewise, growing revenues by raising prices could have the effect of lowering sales. Improving the bottom line is almost always the main strategy of a company.
Share this AirTran commercial in your next team meeting… towards improving that process.
Watch the video above as a team and then answer and discuss the following…
In the video the boss says that he needs everyone to think of ways to improve the bottom line. What is the bottom line?
If there are two fundamental ways to improve the bottom line: increase revenues or reduce expenses… what do you think this underperforming office was doing?
As you think about our team's top initiatives or projects… are they aimed at increasing sales or decreasing expenses?
If our boss called a meeting asked us to think of ways to improve the bottom line, what would you suggest?
The take away…
Depending on your team's role, it might be difficult to pinpoint how your team can impact revenues, but everyone can usually identify a simple way to reduce a cost or improve an efficiency. Encourage everyone on your team to use their business acumen to come up with a cost cutting measure. Explain that many simple ideas can combine to have a big impact on the bottom line.
If you and your team have the book Seeing the Big Picture (Greenleaf, 2012) turn to page 33 and read the section: The Bottom Line and Other Measures of Profit.