{"id":84,"date":"2020-02-04T01:16:23","date_gmt":"2020-02-04T01:16:23","guid":{"rendered":"https:\/\/www.b2bcfo.com\/?page_id=84"},"modified":"2021-11-23T21:08:43","modified_gmt":"2021-11-23T21:08:43","slug":"help-companies-grow-profitably","status":"publish","type":"page","link":"https:\/\/www.b2bcfo.com\/backup2023\/help-companies-grow-profitably\/","title":{"rendered":"Help Companies Grow Profitably"},"content":{"rendered":"\r\n

Help Companies Grow Profitably<\/h1>\r\n

The subject of growing a company profitably is complex.<\/h3>\r\n

Even the definition of \u201cprofitable growth\u201d is subject to opinion. Different definitions might be given depending upon whether one is an economist, an accountant, a governmental taxing authority or a seasoned financial veteran who has worked for decades with owners of privately held companies.<\/p>\r\n

Investopedia.com gives interesting definitions of profit and profitability:<\/p>\r\n

Definition of Profit<\/h3>\r\n

\u201cProfit is an absolute number determined by the amount of\u00a0income\u00a0or\u00a0revenue\u00a0above and beyond the costs or expenses a company incurs. It is calculated as total revenue minus total\u00a0expenses\u00a0and appears on a company’s\u00a0income statement. No matter the size or scope of the business or the industry in which it operates, a company’s objective is always to make a profit.\u201d<\/p>\r\n

\"Profitability+copy\" \"Download-Banner\" <\/a><\/p>\r\n

Definition of Profitability<\/h3>\r\n

\u201cProfitability is closely related to profit \u2013 but with one key difference. While profit is an absolute amount, profitability is a relative one. It is the metric used to determine the scope of a company’s profit in relation to the size of the business. Profitability is a measurement of efficiency \u2013 and ultimately its success or failure. A further definition of profitability is a business’s ability to produce a return on an investment based on its resources in comparison with an alternative investment. Although a company can realize a profit, this does not necessarily mean that the company is profitable.\u201d<\/p>\r\n

The last sentence of the above paragraph by Investopedia.com is paramount, \u201cAlthough a company can realize a profit, this does not necessarily mean that the company is profitable.\u201d<\/p>\r\n

An example<\/h3>\r\n

Most privately held companies are legally organized as pass-through entities, such as S-Corporations, LLCs (Limited Liability Companies), Sole Proprietorships, etc. The pass-through provisions of these entities mean the owners of the entities are taxed personally by federal, state and\/or local authorities.<\/p>\r\n

Let\u2019s assume a privately held company is formed as an LLC and shows a profit of $1,000,000 on the Income Statement at year-end.<\/p>\r\n

At a first glance, some people might say that a $1,000,000 ($1MM) profit is \u201ca large profit.\u201d This may be a large profit to some, but is this amount really profitable? The answer to that question depends upon many variables, such as:<\/p>\r\n

    \r\n
  1. Is the $1MM taxable income to the owner(s) of the company? (i.e., do the owners of the company have income tax loss carryforwards to offset some of the taxes on this amount of money?)<\/li>\r\n
  2. In which state does the owner(s) reside? For example, an owner who resides in the state of California may pay 10% (or more) in state income taxes than an owner who lives in states such as Florida, Nevada or Texas. Distributions may be required to be paid to the owner(s) to satisfy federal, state and\/or local governmental taxes.<\/li>\r\n
  3. What are the personal distribution needs of the owner(s) of the company?<\/li>\r\n
  4. What are the debt service needs of the company for the next few months? (Debt service means the amount of principal payments to be paid on debt, such as note payables, etc.).<\/li>\r\n
  5. Does the company have an adequate working capital line of credit for operations?<\/li>\r\n
  6. Can the company timely collect the trade receivables that were created for the sales to make $1MM in profit.<\/li>\r\n
  7. What is the projected growth of the company for the next year and how much of the profit is needed to fund that growth?<\/li>\r\n
  8. What is the projected free cash flow (FCF) for the following year?<\/li>\r\n<\/ol>\r\n

    The above list of questions would most likely need to be expanded to determine if a company is growing \u201cprofitably.\u201d We can provide a couple of guiding principles to business owners on this most complex topic. First, use time wisely. Spend time within areas of strength and business passion. The following downloadable chapter from one of our proprietary books may help with this subject matter. Second, know the financial strengths and weaknesses of the company. Additionally, know your areas of business passions. Hire extremely competent people who can help in areas of financial weakness and\/or areas for which you have no passion. There\u2019s no reason to reinvent the wheel on this subject of profitability. We have been in business since 1987 and have more than 5,000 years of combined experience helping owners of privately held companies. We have seen almost every financial situation that can be created. We are \u201cthe wheel\u201d and are also trusted business advisors. \"Help-02\"<\/p>\r\n

    OTHER<\/h2>\r\n

    EXPERTISE<\/h2>\r\n

    Improve Cash Flow <\/a> Obtain Bank Loans <\/a> Increase Company Value <\/a> Plan Strategically <\/a> Prepare a Business to Sell <\/a><\/p>\r\n

    Talk to a real expert. Let’s chat and see if we should work together.<\/h2>\r\n

    (480) 397-0591<\/h2>\r\n

    Click Here to Contact Us <\/a><\/p>\r\n

    OR<\/h2>\r\n

    \"New-Partner-Map\" <\/a><\/p>\r\n

    Click here to Find a Professional <\/a><\/h3>\r\n","protected":false},"excerpt":{"rendered":"

    Help Companies Grow Profitably The subject of growing a company profitably is complex. Even the definition of \u201cprofitable growth\u201d is subject to opinion. Different definitions might be given depending upon whether one is an economist, an accountant, a governmental taxing authority or a seasoned financial veteran who has worked for decades with owners of privately…<\/p>\n","protected":false},"author":194,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","cybocfi_hide_featured_image":"","footnotes":"","_members_access_role":[],"_members_access_error":""},"class_list":["post-84","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"\nHelp Companies Grow Profitably - B2B CFO<\/title>\n<meta name=\"description\" content=\"We have the skills to improve the progression of company growth to help an owner successfully get to the next level.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.b2bcfo.com\/backup2023\/help-companies-grow-profitably\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Help Companies Grow Profitably - 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