Bottom Line vs. Top Line (WIth Tips for Growing Them)
By Indeed Editorial Team
Published May 25, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
A company's income statement contains various metrics, with the top line and bottom line being part of the essential ones. The top line is the company's total income, and the bottom line is the income minus tax and other expenses. Understanding the bottom line vs. top line can help you know the difference between both metrics and their implications when analyzing financial health.
In this article, we discuss both concepts and their differences and examine tips for growing them.
Bottom line vs. top line
While both are vital lines in the company's income statement, when considering the bottom line vs. top line, there are two relevant aspects to consider:
The bottom line refers to the company's net income, which you can also call the net profits or net earnings. Usually, it's the last line on the income statement, creating its nickname. It's the profit that remains after a company subtracts its operating costs. Such operating expenses include depreciation costs, taxes, interest, general costs, labour costs, administrative costs, and loan repayments.
It shows the company's efficiency in managing operating costs. Generally, you can increase your bottom line by being efficient in using company resources when dealing with operating expenses.
The top line refers to the company's gross income before subtracting operating costs. Generally, it's in the top section of the income statement, creating its nickname. It's the gross money a company makes from selling its products and services, securing investments, and hosting fundraising events. It shows the company's effectiveness in generating revenue and completing sales.
Usually, most companies seek to increase their top line yearly through advertising, partnerships, public offerings, and premium product offerings. The increase in the top line can result in a bottom-line increase if the operating costs don't increase.
The lines' growth serves as a form of comparison between both lines. Top line growth may indicate an increase in revenue but may not mean an increase in the bottom line. Similarly, a bottom line increase may not represent an increase in the top line because the company cut costs in times of slow economic activity. For example, a decrease in your yearly sales can cause you to reduce labour costs, income taxes and take fewer loans, leading to bottom-line growth.
Tips for growing the bottom line
Here's an overview of strategies you can use to grow the bottom line:
Cross-sell your products
After a successful purchase by a customer, you can offer other products or services to them that may complement their purchase. This strategy can work well on customers, especially when the other products are necessary accessories. Cross-selling can help you reduce the storage costs of keeping the products. It can also help you reduce the money to spend on advertising the products.
Pick the right customers
It's essential that you channel your sales messaging and outreach toward the right customers. In the course of regular sales, you can see the customers that contribute the most significant bulk of your revenue. To increase your bottom line, it's crucial to analyze their habits and likes and direct your sales outreach towards satisfying customers like them. This can help you reduce operating costs towards satisfying other customers that don't make significant purchases.
Increase product pricing
Ensure you take a good look at the price margins to discover if the profits cover overhead costs. Generally, you may want to present competitive prices in your industry, but you can try to wiggle a price increase. You may also justify your price increase by putting an additional feature in your product. When your price margins get higher, you have a higher bottom line because there's more money in the gross income with stable operating costs.
Streamline your marketing
Usually, companies target a diverse set of persons in their marketing to get many customers. Such a marketing strategy generally costs a lot of money, and you can reduce the marketing costs by streamlining your audience. When you want to start a marketing campaign, research your most suitable audience and market to only them. This act can help you save money on marketing campaigns targeting people who can't be your customers.
Get payments on time
When you increase sales, it's also essential to get the payments for the products on time. Getting your payments when due helps you pay your loans quickly to reduce interest rates and satisfy suppliers without recourse to legal issues. Similarly, quick payment can help create marketing campaigns to align with current market trends at the appropriate periods. To get the payments on time, you can employ a collections person or company to work solely on that.
Convert your audience
After getting the right customers, it's essential to convert them into purchasing customers. You can do this by making your landing pages easily readable and consistent with the marketing campaign. You can also ensure the landing page contains the correct contact information for the viewer to contact you quickly. Getting them to contact you immediately ensures that you can have a smaller budget for marketing.
Switch to a remote work system
More companies are considering the work-from-home system because employees can complete their tasks remotely while the company saves money on physical location expenses. Switching to a fully remote system can help your company remove the need for an office, lowering operating costs. If it's impossible to close your physical office fully, you may have employees physically for a day per week. Reducing their physical work time can reduce costs such as electricity, cleaning, and gas.
Automate business processes
Whenever you have an opportunity to outsource or automate business processes, ensure that you use it. Automating your sales outreach, marketing campaigns, and audience conversion can help you reduce labour costs. Outsourcing work out to a cheaper company can also help you reduce labour costs.
Tips for growing the top line
Here are some tips that can help you grow your top line:
This is the most common way of generating revenue. By offering coupons, discounts, and rebates, you can give customers a feeling of success and bring in new sales traffic. You can use discounts to get customers to buy exciting products at a low price, and they can begin to purchase the products normally later. The freebies serve as introductory means to your products.
Make defined goals
Create a target structure and make realistic goals for your sales and revenue increase. With the defined goals, you can create plans and itemize processes toward achieving your goals. Making progress in some defined goals can also motivate you to complete other goals.
Survey your customer base
Consider starting a survey to discover the customer demographics and understand the customer base better. You can send the surveys to potential customers through social media posts and ads or physical means. When sending out the surveys, you can motivate people to complete them by offering discounts on products, gift cards, cash, or products. You can also send your surveys to existing customers to help define your actual customer base and their demographics for better marketing targeting.
Target repeat customers
Consider cultivating your relationships with committed customers to increase sales. As they're regular customers in love with the products or services, increasing communication with them is essential. Send them regular messages to inform them of new products and thank them for regular patronage.
You can also explore the effectiveness of these messages by reviewing metrics such as the number of recipients and viewers of the messages. Analyzing the metrics can help you decide if you need a new messaging style or you can maintain the existing one.
Become a renowned company in your field
Generally, people love to associate with famous companies and use its products. By becoming active in professional events in your field and starting a helpful blog, you can become a renowned company. You can organize industry-specific podcasts, create valuable articles, and share knowledge with the public. Performing these acts increases company visibility as customers begin to respect the expertise, leading to greater trust in products.
Target former customers
Former customers can be a source of new revenue when you include them in the sales outreach. You can also bring them back with less work than getting new customers because of their familiarity with your brand. To make them come back to a product or service, you can introduce a special discount for persons with old products when they get an upgrade. When you target them, it can also ensure that they refer the business to other old customers and even new customers.
Review product pricing
A change in the prices of your products can be beneficial for increasing revenue. You can lower prices and get a broader customer base to purchase more products. Similarly, you can increase prices if you believe there are loyal customers that can continue buying the premium products. You may introduce a tiered subscription structure to enable customers easily identify their suitable tiers and make purchases accordingly.
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