Does your online revenue growth seem a little exhausted? Online sales in the Netherlands seem to be leveling off. It grew 24% in 2021, followed by a 5.8% decline in 2022*. The “free” growth during the corona period is behind us.
With impetuous growth comes focus on your top-line, focus on your sales. After all, you don’t want to miss out on growth through potential new customers and markets. Meanwhile, the economic picture looks a little more uncertain. Many households are struggling with higher monthly expenses, such as higher costs for energy and groceries. This directly affects their spending habits, including their online purchases.
But even if your sales are down a bit, you can bottom-line grow. So time for a critical look inside. Time to focus on your bottom-line growth.
What is the difference between top-line growth and bottom-line growth?
Top-line growth refers to sales growth. Some examples:
- Increase the number of customers through marketing efforts.
- Get new customers through advertising.
- Launch a new product line.
- Increase prices.
- Take over another company that increases market share.
Bottom-line growth refers to what is “below the line” of the income statement. Also called net profit. Some examples:
- Save on customer acquisition costs through smarter, more targeted marketing.
- Increase efficiency in production or services.
- Reduce service provider costs.
- Reduce workers’ wages and benefits.
- Offer employees training to improve productivity.
- Implement cost-saving measures to reduce overhead costs with digitization.
- Improve collection methods for customers who pay late.
Labor market tightness
The 4th point above regarding “cutting wages and benefits” needs explanation in the current labor market conditions. Many companies are struggling with staff shortages. Fueled by higher inflation, wages are also rising significantly. There is tightness in the labor market, employee costs are going up, so there are no savings to be made there now. Then where?
Focus on business negotiation
Effective negotiation is a way to reduce your costs and improve your bottom line in the short term. If you do not currently spend time and energy negotiating for business products and services, or are not sufficiently knowledgeable about them, you will likely pay “full price” for this.
Some areas of focus that you can look at critically to (re)negotiate:
- marketing and sales costs
- production costs
- costs of service providers
- legal costs
- working capital financing
- commercial mortgage loans
- utility costs
- refinancing of corporate loans
These are often monthly recurring costs where a one-time (re-)negotiation ensures that you have lower monthly costs for years to come. Count your winnings.
Encourage everyone in the organization to use their business acumen to come up with cost-saving measures. Do you lack internal content knowledge on a particular topic? Ask a specialist. That one will probably pay for itself quickly. It can have a big impact on net operating income below the line, the bottom-line.
As a result of TBL theory and practice, companies have come to realize that there is a link between social well-being, environmental awareness and an organization’s financial success and resilience. To obtain an accurate picture of their operations, organizations must fully account for all costs associated with their business activities and go beyond just compliance.
“The triple bottom line wasn’t designed to be just an accounting tool. It was supposed to provoke deeper thinking about capitalism and its future.” – John Elkington in this Harvard Business Review article.
What is the triple bottom-line (TBL)?
- A framework for transformation that helps businesses and organizations move toward a regenerative and more sustainable future.
- It provides tools to help an organization measure, benchmark, set goals and ultimately move toward more sustainable systems and models.
- It shows that if an organization focuses only on profit and ignores the impact on people and planet, it is unable to justify the full cost of doing business. You will then not be successful in the long run.
The 3 P’s explained:
1. Profit
When making strategic plans and major business decisions, priority is often given to maximizing profits, reducing costs and mitigating risks.
Are we looking at profits from the triple bottom-line perspective? Then it’s about making sure the profits contribute to strengthening and supporting the community as a whole, not just going to the CEO and shareholders. Indeed, in the past, that was often the sole purpose of many companies.
Today, however, purposeful leaders realize that they can use their companies to contribute to the well-being and perspective of their employees and beyond, without compromising financial performance.
2. People
Takes into account all stakeholders (versus just shareholders), including employees, communities in which an organization operates, individuals in the supply chain, future generations and customers.
The connection to corporate social responsibility (CSR) is central to this segment of the triple bottom-line. CSR is defined as the responsibility of organizations to meet the needs of their stakeholders and the responsibility of stakeholders to hold organizations accountable for their actions. Some initiatives an organization may consider as part of its CSR goals include:
- promotion of human rights
- ending poverty and hunger
- diversity, equity and inclusion
- gender equality
- Ensuring a healthy and safe work environment
- civic engagement and volunteerism
Implementing CSR initiatives does not only benefit stakeholders. This also benefits the organization itself. Companies committed to CSR often share best practices with other companies and organizations.
3. Planet
With the rise of social media, increasing transparency and the growth of activism among consumers, stakeholders now have more power than ever to hold organizations accountable for their actions. Public opinion and buying behavior are influenced by how organizations are committed to corporate social responsibility and sustainability, and this trend will only increase.
Consumers reward companies that are committed to making positive impacts on society. Stakeholders increasingly understand the environmental, community and economic impact of business activities. Greater importance is given to global issues such as climate change and social justice.
The (extra) ‘P’ of Prosperity
The triple bottom line approach is a systematic approach that emphasizes the connection between people, planet and prosperity. This connectedness is also at the heart of the sustainable Social Development Goals (SDGs) of the United Nations (UN), which aim to create “a world in which all people can live a prosperous and dignified life in harmony with nature through economic, social and technological progress. UN SDGs cover a wide range of areas, including environment, people and economic opportunity. One of the goals that focuses specifically on prosperity focuses on providing decent work, safe working conditions, adequate pay and engaged leadership for people in vulnerable working conditions to promote economic growth.
*Sourceintro.
