10.21.2013

What's Your Plan?

By: Rebecca Cho


In the business world, it is important to understand the balance needed between short-term and long-term profitability.  Many entrepreneurs are conflicted about whether or not they should focus more on protecting long-term business benefits or instead concentrate on increasing near-term profits.  For example, a business may be pressed to either:

- quickly generate profits, in order to cover their basic costs OR
- invest in infrastructure or other resources that will yield long term benefits OR
- shift resources to satisfy demand for a new trend OR
-  maintain a broad and consistent product offering

What is the right answer? It really depends. However there are a number of important things to consider, to help you make the best choice for your business. 

Pros and Cons of Focusing on Near-Term Profits:
·         - Creates cash flow for your business to allow for expansion and/or pay off business debt
·         - Risk increases due to a singular focus on a strong demand in a product/service that has the potential to weaken without warning
·         - Immediate gains can provide the boost needed for your business to build a stronger customer base
·         - Temporary profitability can be misleading and inaccurate when determining whether your business is healthy
·         
Pros and Cons of Protecting Long-Term Business Benefits: 
·         -  Allows for business expansion and investment to spread profitability more evenly over time
·         - Real business growth is heavily dependent on long-term models
·         - Cash flow is not as immediately apparent
·         - Revenue stream is unpredictable – meaning you gain income investment steadily over-time

While these decisions may seem like big risk factors that either weaken or grow your business, short-term profit maximization and long-term business sustainability can co-exist.  Following your business plan and using your resources wisely will give you the necessary scope to find this balance.  


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