Why You Need a Strong Top Line
December 18, 2018
As we discussed in a prior post, your top line is your gross sales and is effectively an indicator of your ability to market and sell your services. Here are three reasons why you need a strong top line for your telephone answering service.
Economy of Scale
Typically, telephone answering services with a weak top line focus their attention on streamlining operations to at least ensure they are profitable, to keep their bottom line positive. Unfortunately, as their top line decreases—due to either neglect or failure—it becomes harder and harder to keep the bottom line positive. That’s one reason why businesses need a strong top line. Without robust sales, they lack the economy of scale needed to operate a profitable business.
Another reason why a strong top line is important is for your business’s market valuation. Even if your telephone answering service is privately held, you need a healthy valuation. Eventually, you will want to sell your answering service. Even if this is something as simple as transferring it to a relative, it is still a sale and most business owners want to sell for as much as they can. Often, selling their business is effectively their retirement plan. Doesn’t everyone want to retire in style? The same applies if you sell to a key employee or an ESOP (employees’ stock ownership plan).
Even more important is selling to a third party. While some businesses are purchased based on a multiple of the bottom line (net profit), many telephone answering services are purchased on a multiple of the top line (gross sales), but the more savvy purchasers offer a multiple of EBITDA. EBITDA is the key acquisition metric. A prerequisite to a strong EBITDA is a strong top line. You can’t have the former without the latter.
Grow your top line today for a better tomorrow.
Janet Livingston is the president of Call Center Sales Pro, a premier sales and marketing service provider for the call center and telephone answering service industry. Contact Janet at firstname.lastname@example.org or 800-901-7706.
Peter Lyle DeHaan is a freelance writer from Southwest Michigan.
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