Rising sales + cost control = success

Managing to earn a high return on investment (RoI) by means of
raising the market demand for the product or services, thereby getting higher
margins in the sales is what every businessman aims at. Increasing sales. Yes!
That's the keyword. It's all about advertising campaigns, promotion events,
reducing product price and coming up with an exclusive USP. But again, it's
all easy said than done. Achieving higher net profit is a different game
altogether. Here comes in focus the role of an effective bottomline, at the same
time understanding the need to balance both topline and bottomline.

What do they mean?

Bottomline is the net income of a company. More specifically, it is a company's
income after all expenses have been deducted from revenues. These expenses
include interest charges paid on loans, general and administrative costs and
income taxes.

The topline is a company's gross sale or revenue. When a
company says its firm has achieved a topline growth, it means that company is
making profit in terms of an increase in gross sale or revenue. Bottom-line
growth would take place where the company finds a new source for raw materials
that results in a cost saving.

Bottomline describes how efficient a company is in the
management of its spending and operating costs. Topline, on the other hand,
indicates how successful a company is at generating sales without considering
operating efficiencies. Both these figures are vital for determining the
financial strength of a company. Both have their own significance in
representing company growth.

A business idea

Every capitalist, in order to grow his business, pays proper attention to
even the tiniest aspect of the trade to stay competent in the market. To get a
control over the dynamism of the business process, there is a severe need to pay
equal attention to not just the topline but also to the bottomline, which
actually leads to the revenue in hand.

In the solution-providing business, it is even more difficult to
concentrate on the management of funds, as there is already a stiff competition
and the owner cannot afford to miss a single opportunity on the service ground.
Therefore, to strike a balance between the two, one has to follow an accurate
business model with regard to the management of finances. Solution providers
should try to acquire the methods best suited for this particular segment. A
proper consideration has to be given to maintain optimal return, deploy all the
resources and utilize them to maximum. By online tracking of the business,
day-to-day transactions of the business can be kept updated. One can keep
oneself abreast of the latest developments in the market. Apart from that,
preparing monthly balance sheets and reviewing complete picture of the financial
activities come handy in organizing the funds.

An intelligent decision is to get company funds through internal
accrual peaks supported by bank funding so as to ensure smooth functioning of
the financial activities.

More important

For people in the solution-providing business, it is imperative to know the
importance of both topline and bottomline. This is helpful in drawing a plan of
action for successful implementation of the strategies. To increase the sales
and at the same time control the expenses incurred by the organization, there is
a need to give considerable focus on the bottomline. It is evident from the
Indian technology business pattern that an entrepreneur's primary focus should

be on the bottomline, and topline is considered as incidental. Bottomline, which
means net of all expenses, is the actual earning and is the real representation
of a company's success or failure. Whereas, transactional margins prior to the
deduction of all costs are misleading. Entrepreneurs working in this technology
business often refer to the bottomline as the bird in the hand and topline as
the two in the bush.

To grow both

As far as topline is concerned, it is the first thing that comes in the mind
with regard to stepping the business towards the growth ladder. In our easy and
over distribution of products, lack of business maturity among large number of
partners, increasing costs of man power, cost of funds, absences of any kind of
accreditation agency, some market players race to build topline. These
capitalist strives hard to push the sales figures upwards by acquiring various
promotional means. To capture the market potential and steer it for own benefit,
a businessman not only takes care of its own product and services but also
applies the mechanism that ensures the information about market trends and
opportunities. Creating brand equity, genuine value preposition for the
customers with clear differentiation are certain measures which one takes to
attain higher margins in sales. Identifying the market opportunities and
aligning with the growing market goes hand in hand with the other measures like
reaching a higher topline. In addition, creating a scalable business model
supports the entire brand promotion process. There is also a need to give
reasonable focus on the long-term prospects of the business besides the current
business need to sustain the topline growth. Often, in order to keep a tab on
the routine business operations, one tends to loose a grip over the actions,
which though slowly, has a severe adverse impact on the venture in the long run.
There arises the necessity to take preventive measures against such activities
and laying a business policy to stay secured.

Striking a balance

The proprietor once understood the impact topline and bottomline have on the
enterprise and the importance of sustaining stability in both, give required
emphasis on the expenses of the company. To strike a balance between topline and
bottomline, they keep their bottomline growth targets aggressive, and recognize
and reward the factors that contribute to the bottomline escalation. It is good
to drop product or business activity, which shows unsustainable bottomline, and
keep experimenting with the new opportunities' pump up operation where early
success is achieved.

Beginners in the business world takes a lot of time learning
through experience and by facing losses. Those who are in process of loosing and
learning, it becomes essential to understand the right ratio at which these two
should grow. It has been observed that this ratio should be approximately 25
percent more than what the industry is having. For instance, if the industry
average is 16 percent, 20 percent minimum is to be aimed to be ahead of others.

To conclude, it can be said that though a company cannot
flourish without proper focus on increasing the sales rate, ie growing topline,
but for continuous movement towards success, required emphasis has to be given
on bottomline as one can earn as much through the hardships and honesty. But to
spend all the money earned cannot lead to growth in the long-run. Therefore, it
can be said that bottomline is like an oasis in a desert, and topline, a mirage.

As told to Lata Singh

latas@cybermedia.co.in