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No Revenue Growth
If a business is growing revenue at 5% but growing earnings at 20% it is important to ask how this is happening and is it sustainable. The business is likely doing one or more of the following:

1 - Squeezing employees and asking them to perform more work for the same pay
2 - Squeezing suppliers/manufacturers and likely using cheaper materials or inventory
3 - Squeezing customers providing less value for the same or more money

I do not believe either of these are sustainable and often lead to toxic work culture. In sum, you need to grow revenue in order to sustainably grow earnings.

Ryan Mahony's avatar
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