Short-Term Profit vs. Long-Term Business Growth
by Leeia Ladipoh on March 26th, 2008
All companies have two ways of looking at things -the short-term and the long-term.
It is important to keep these in balance in order to help your company continue to be profitable over time.
The initial outlay to begin a small business is usually a major expense. Many entrepreneurs hit the ground running, waiting for the profits to roll in to pay off the initial expenses and start putting a lot of cash in their pocket.
Before you earn those profits, you have to decide whether you want to be able to keep your business running – or just take the money and run.
If you are only planning to run your company for a short period of time, you will want to take your profits and head to the bank. On the other hand, if your venture is one you picture as a permanent situation, you must seriously consider how much money will be going back into the company.
You need to take a closer look at your short-term profit potential versus your plans for long-term growth:
Short-Term Profit
While it’s great to think about the profit coming in week to week from your business, if you don’t consider what that money can do for your business in the long run you are doing yourself a huge disservice.
An orientation towards short-term profit means your business will remain at the same operational level as it is now. While the ’status quo’ tactic may work for a while, eventually other businesses that are similar to yours will start making advances – and you will be at the back of the pack, left in the dust.
If you are running a company that will have a short life span, short-term profit is an acceptable focus; but if you want your company to be around for the long haul, you need to think in terms of winning a marathon, not a short sprint.
Long-Term Growth
Regular investment is necessary if you want your business to achieve long-term growth. From the beginning, you should put a set percentage of your profits back into the business.
Study your market and industry. Try to envision how things need to go for your business to reach the next level. In order to keep up, your company has to be able to go to the next level with, or before, the others in your field.
By putting some of your profits back into the business at regular intervals, you will be able to retain your place in the race for the long-term win.
Before you open shop, you should have short-term and long-term goals created for your business. While you should be able to enjoy some short-term profits, make sure you are putting a decent amount away to be able to stay in the game for the long-term.