Business profitability is based on a well-thought-out plan, designed with sales and operational efficiency in mind. The income statement is a basic tool for monitoring financial performance; however, tracking it in the traditional way can obscure the view of what lies ahead.
Therefore, it is useful to "flip it around" and break down the potential using EBITDA, which offers a more focused view of profits and true growth prospects. EBITDA measures a company’s ability to generate profits before accounting for financial and accounting charges that do not directly affect operations.
Developing this metric is crucial, as increasing EBITDA greatly improves financial health and investment potential. Reducing expenses is the most effective way to increase EBITDA. This means managing not only variable expenses but also fixed and administrative expenses through a thorough and ongoing review.
In Colombia, with a decoupled economic environment, being flexible and lean in terms of expenses allows for better adaptation to changes and improves margins. Reducing overhead costs has a direct impact on EBITDA, as it increases the company’s operating margin even without additional sales. But to achieve sustainable growth, cost reduction must also be combined with a commercial approach that prioritizes new sales opportunities in key markets where there is room for growth. These markets could be sectors with low competition, specialty niches, or geographic areas with high potential demand.
The answer lies in identifying where the company can add the most value and setting prices in a way that results in a healthy margin. Therefore, it is critical to strike a balance between cost reduction and business expansion. If the income statement is managed based on recurring EBITDA, business leaders are provided with a better foundation for making decisions that increase profitability and, consequently, sustained growth in an economy like Colombia’s, which needs greater dynamism and adaptability.
Finally, Colombian companies seeking positive results and growth must focus on reducing expenses as the action with the greatest impact on EBITDA, while pursuing sales growth in strategic markets that allow them to maintain competitive margins. This combination is the path to increasing profitability and ensuring financial sustainability in the current environment.
