What Does the Bottom Line Mean Anyway?

According to Investopedia.com, the bottom line “refers to a company’s net earnings, net income or earnings per share (EPS).” It further explains:

The reference to “bottom” describes the relative location of the net income figure on a company’s income statement; it will almost always be the last line at the bottom of the page. This reflects the fact that all expenses have already been taken out of revenues, and there is nothing left to subtract. This stands in contrast to revenues, which are considered the “top line” figures.

Most companies aim to improve their bottom lines through two simultaneous methods: growing revenues (i.e., generate top-line growth) and increasing efficiency (or cutting costs).

So, what’s more important: making the sale or making a profit?

When you make a sale that you know will ultimately be unprofitable, it’s easy to justify the reasoning because it has the potential to “bring in additional business”.

When we get into this mentality, it makes it easier for us to continue to reduce other budgets, write off costs and/or not account for time. But when you’re looking at your net income versus your expenses, and you have to make the decision to let someone go because you need to cut costs, this should affect you as a business owner, as a leader and as a person.

A few months ago, my friend’s company had a major layoff, and she was let go on the week she had a doctor’s appointment to check out a recently-discovered lump in her breast. She has no family support and was left with no source of income, no insurance and no hope of finding a job at this late stage in her life (she was 2 years away from retirement). Can you imagine facing breast cancer alone in such dire circumstances?

Adhering to the realities of a budget is not about the profitability for your company. It’s your responsibity to make money to help ensure income for the people you have hired. It’s about someone’s security. It’s about someone’s life. So, if you choose to ignore the bottom line, you may not be impacted personally, but it will be very personal to the human being that hits rock bottom.

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