Business profit is based on a well-thought-out plan; designed with sales and efficiency in mind. The income statement is a basic tool for monitoring financial performance; however; following it in the traditional way can cloud the vision of what is to come.
Therefore; it is useful to "turn it around" and break down the potential from EBITDA; which offers a more focused view of profits and true growth prospects. EBITDA measures a company's ability to generate profits before considering financial and accounting charges that do not directly affect operations.
Developing this indicator 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 leads to better adaptation to changes and improves margins. Reducing overheads has a direct impact on EBITDA; as it increases the company's operating margin even if there are no additional sales. But to achieve sustainable growth; cost reduction must also be combined with a commercial approach that prioritises new sales opportunities in key markets where there is margin. These markets could be sectors with low competition; specialist niches or geographical areas with high potential demand.The answer is to know where the company can add the most value and set prices in a way that results in a healthy margin. Therefore; it is critical to strike a balance between cost reduction and commercial expansion. Managing the income statement based on recurring EBITDA provides business leaders with a better basis for making decisions that increase profitability and; consequently; sustained growth in an economy such as Colombia's; which needs more dynamism and adaptability.
Finally; Colombian companies that want to achieve positive results and growth must focus on reducing expenses as the action with the greatest impact on EBITDA; while seeking sales growth in strategic markets that allow them to maintain competitive margins. This mix is the way to increase profitability and ensure financial sustainability in the current environment.
