Profit Plan

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One of the hardest things to get across sometimes is that the budget is referring to revenue, expense and balance sheet planning.  When we make a personal budget, the focus is on managing expenses, because our revenue is usually in the form of a salary that we don’t have a lot of control over.  If there was such a term our salaries would be fixed revenues.

One of the alternate terms used for budgeting in some companies is “profit planning”.  This helps get the message across that planning the revenue side is at least as important as the expense side. 

I’ve read where stock analysts value an increase in revenue more than a decrease in expenses, because they know that revenue growth can continue, but eventually, the company will not be able to cut expenses below a certain level without harming the business.