How should we measure our growth?
Short Answer:
If you want to drive a higher valuation, scaling total gross margin dollars and gross margin percentage are two key indicators more important than top or bottom-line growth. It’s also more important to show steady growth than sporadic growth. And according to Fred Reichheld, there are good and bad profits. Bad profits are taking advantage of a client; good profits from delivering true value. Last, cash is key with many firms “growing broke.” Growth without a well-defined source of cash flow is fatal. Best if your cash increases as you grow – what is called a negative cash conversion cycle.
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