Reasons Why A Company's Big Revenues Can Be Deceiving

Deceiving Big Revenues

A company which is receiving big revenues monthly or annually doesn't necessarily mean that the company itself is in a good shape. There are a lot of reasons as to why a company can earn money, it maybe because of direct marketing, social media updates, or even content marketing.

The question now is, how can one identify if the company is indeed in good shape without pertaining solely on the company’s revenue?

The answer is simple, every company should have at least one or group of people under the management consultant team. They analyses organizational problems, they also develop plans for improvement. Their purpose is also to help the organization or the business to improve its performance.

Also, before investing in a business which has a lot of revenues, always try to dig deeper. Below are some lists of the things you need to remember before investing:

1. Revenue and profit are not the same.

Between the two, you might want to check the profit instead of the revenue. Simply because, revenue is just the straight sales while on the other hand, profit is the money left after subtracting all the expenses.

2. Profit Margin.

You might also want to check the percentage of the profit margin. This is the part of the revenue which is actually the profit. So the higher the profit margin, the better. If the profit margin is way too low, then it is not a good investment at all.

3. Large Purchases at once.

If there is a need to by certain product, then buy it all at once. Why? So that the next quarter profit will be much better. Also take into consideration of at least checking your new and previous profits. This way you’ll be able to identify if you are still on track, or if you’re earning more or less. You can also identify if there is a graph that shows certain months which has high or low profits.

Planning your next step will rely on these results as well.

4. Revenue is not fixed.

This means that, the revenue will not be always at its highest. There will come a time where it can be lower than expected. Most often than not, the result of this fluctuation depends on your decisions from the past. The more efficient your decisions before the better now.

Yes, it is a continuous cycle. You plan, decide, get the revenue and then it will happen again. The only difference is that most precise and efficient decisions made now can make a huge impact in the future.

The lists above are just few of the things an entrepreneur or people who wanted to invest in big revenue company, should take into consideration with. Research, Think and Decide.

Elling Wirum is a Norwegian entrepreneur and businessman, who presently holds the Chief Executive position in Fountain Powerboats Scandinavian, a high-quality boat manufacturing industry based in Oslo, Norway.