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Scaling a business should be focused on personal and profit margin goals rather than revenue growth to efficiently foster sustainable success.
SME owners must value profit margins over revenue, accountants reveal
14 March 2025
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8 minute read
Profit margins should be the key focus area for business owners when looking to scale operations to the $1 million revenue mark, according to Natalie Lennon, founder of Two Sides Accounting, and Kyelie Baxter, director of IQ Accountants.
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In a panel session at the Accounting Business Expo on Wednesday, Lennon and Baxter noted they had differing opinions towards business growth goals, yet agreed that profit margins were a critical area in building and scaling a successful business.
The pair outlined profit margins to be a critical factor as a business with $1 million in revenue might have a profit margin that was less than a business with $500,000 in revenue, depending on decisions and choices made by the business owner.
Lennon said it was often easy for business owners to get caught up in comparing the revenue success of others to their own when scrolling social media; however, more often than not, those businesses weren’t making any profit.
“Oftentimes, we look at their figures, and we can say that their revenue is great. They’ve got all this top line, but there's no profit, and they’re often not paying themselves. They're stressed out, and they don't have a work/life balance,” Lennon said.
“I think it’s really important to think about what we want out of our businesses when starting in the first place and build from there.”
“Don’t get caught up in building the business that we think we should from society and social media. Build the business that you want.”
Baxter echoed these sentiments and said there was a difference between building a business someone was proud of and building a business that sounded good on paper.
Business owners usually set the common revenue goal of building to the $1 million mark, yet there were often misconceptions associated with this, Baxter said.
“We need to think about what lifestyle we want. How many hours do we want to work at home? Do we want to work from an office? Simply defining factors like this do make all the difference,” she said.
“I think it’s really important, especially when you’re starting, to start with the end in mind. Why are you growing? What do you need? What profit margin do you need?”
The pair noted a key element in achieving a substantial profit margin that worked for them in their firms was establishing distinct systems and processes.
Lennon said with a smaller team and clearly defined systems and processes, she was able to have “her finger on the pulse” more which contributed to the achievement of a better profit margin than what she had previously had with a bigger team.
“When I first started, I knew what I didn’t want, and I knew that I needed systems and processes,” Lennon said.
“I knew that when I had a team walk-in, I already had a step-by-step process laid out for them. I have checklists for my staff with what they need to do for every process and requirement, like a BAS, for example.”
Baxter said that when shaping a business and its success, growth should be intentional and not reactive.
“Along the journey, I learnt that systems aren’t just about efficiency but also about protecting your sanity. I love processes, templates and checklists, and I think they’re the key to growing,” Baxter said.
“To make life easier for yourself, your team and your business, you have to know what your systems and processes are and how they’re going to fit into your business journey.”
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