Invoice Bazaar Blog

A business enterprise must become profitable to ensure that it doesn’t perish

By Invoice Bazaar | June 30, 2022

Earning a profit is one of the key objectives of every business enterprise as it can sustain itself and will be termed successful only if it is able to generate profits continually. In other words, for every business venture, profitability is more important than many other goals and objectives because its survival, sustainability, and continued growth and prosperity will directly depend on its profitability. And it is essential to note that achieving operational profitability alone doesn’t suffice; rather, every business enterprise must register net profit, which is the profit after deducting all expenses, costs, and taxes.

It is an accepted fact that a newly launched business or startup may not begin to earn a profit right from its inception. Instead, it may even take some time to break even. But downplaying the importance of profits, delaying the achievement of profitability, or not striving to make a business venture profitable within the shortest possible time is one of the biggest mistakes a business owner may commit. Sometimes, a small business or startup may find it more tempting to chase business growth while disregarding or ignoring profitability.

Of late, with venture capital funding in startups or new businesses becoming more formalized and transparent, there’s also a race to comply with statistical criteria to get a series of funding. This is also because the perception of growth may side-line profitability. But growth alone is not sufficient by itself for a business to survive. Furthermore, some entrepreneurs forget that investments in one’s company are not assets but liabilities. There is another business model wherein a startup mobilizes funds, reaches a growth point fast and then sells off the business.

In such cases, the business objective or strategic goal from the very beginning would have been to build up and sell off the business at the earliest opportunity. And that may appear to be a convincing rationale for disregarding profitability and chasing growth. But the unpleasant truth is that no sane purchaser will pay a good price for a business that promises or boasts about profitability but has been unable to demonstrate how that promise can be fulfilled or accomplished convincingly.

Sometimes, the success of a startup or business venture may depend upon the delicate balance between profitability and business growth. In such cases, both growth and profit may be equally essential and may fail to work out well without the other if that business has to sustain and thrive. However, here it would be worthwhile to reiterate that in most cases, a firm can sustain or thrive even without growth if it earns a decent profit and continues to remain profitable. But unchecked or unplanned business growth without being able to achieve profitability is just rushing headlong towards a financial precipice where a fatal plunge can be averted only by reaching profitability before the brink arrives.