Profitable Growth is an imperative
because it benefits all stakeholders of the enterprise
The development of a business enterprise (business division, sales division, …) is characterized by the course of sales revenue and profitability (especially of the returns on sales at the stages of GP(%), EBITDA (%), EBIT (%), EAT(%)).
Revenue and profitability may develop independently in certain areas, they may grow, stagnate or decline. The figure shows (based on real businesses) six trend examples : growth, stagnation, downtrend, downturn, turnaround and divergence.business corporation
Sales revenue(m€), EBIT(m€), EBIT Return on Sales (%)
Sales revenue and profitability typically develop in one of nine typical cases; which are shown in the graphic below.
Profitable Growth (PG) is on hand in case that revenue and profitability grow simultaneously.
Essential PG nuances are sales-progressive profitability stagnation. (revenue grows with return on sales stagnates) and profitability-progressive sales stagnation (revenue stagnates while return on sales grows).
These are bulky terms, nevertheless they are precise from a management technique point of view.
The benefits of Profitable Growth
For today’s B2B enterprises Profitable Growth is an imperative, because it benefits all stakeholders of the company.
This is shown in a short overview along the structure of the P&L and per stakeholder group.
|P&L Level||Stakeholder||Benefits of Profitable Growth|
|Revenue||Customers||More customers are getting more and better products|
|COGS||Suppliers||may deliver more parts, materials and services|
|Labour costs||Staff||Development perspectives, salary increases and job security|
|Interest rate||Banks||higher interest intakes|
|Taxes||Public||higher tax intake for better financing of public projects|
|Results||Shareholder||steady dividends, stable ROE, growing SHV|
The options of reaching and optimizing Profitable Growth which can be used by todays B2B companies by methods of advanced analytics, management, strategiy, optimizers and AI are discussed on the following pages.