Commercial Insights

Profitability vs. growth: How to measure business success

When it comes to measuring success, should you pay attention to profitability or growth?

In the dynamic world of business, two key performance indicators—profitability and growth—often shape the trajectory of an organization’s success. While deeply interconnected, they are not always aligned, but they are vital to a company’s immediate survival. Understanding the differences, interdependencies, and strategic trade-offs is crucial for business leaders striving for long-term success.

However, in recent years, many businesses—including tech companies—increasingly have placed a priority on growth over profit. “Often businesses in the tech space have substantial capital and the ability to raise more,” notes Tony Stiffler, Florida Commercial Banking Executive with Regions. “Most middle market companies don’t have this same ability.” As a result, many have struggled to consistently turn a profit.

“No amount of growth without a long-term, solid profitable foundation is sustainable,” says Stiffler.

According to recent data from EY’s Global IPO Trends, companies that had initial public offerings that were profitable in the first quarter of 2025 has risen significantly from 2024. In the first quarter of 2024, less than one third of IPO companies in the U.S. were profitable, while more recent data puts that figure at nearly 60% in 2025.

This may reflect a shift in strategy where a focus on growth over revenue was often seen in the tech sector, which may not be right for other industries—and business leaders may be adjusting their approach as a result. Growth initiatives require significant investment, whether product development, hiring, marketing, or expansion. In fast-growing industries, such as tech, AI and renewable energy, rapid expansion may be essential to avoid falling behind, but the trade-off may be short-term depending on market and industry conditions.

Profitability vs. growth: Prioritizing for success

Before prioritizing growth or profitability, carefully evaluate a few defining elements in your business profile: long-term goals, maturity, market position and stakeholder engagement.

Profitability vs. growth: Defining for your business

These two metrics often overlap when it comes to assessing a company’s success, however prioritizing profitability over growth may lead to more sustainable success.

Profitability may be based on high profit margins, which is the net profit after subtracting the cost of goods sold from revenue. “But not always,” says Stiffler, who emphasizes consistent margins with good potential growth leads to stronger profit growth year-over-year. Critical ways to gauge a business’s growth include its expanding market share and growing user base.

Business leaders should decide what these metrics mean for them and ask the following questions:

• What is your timeline for achieving your milestones?
• What profit margins will help you achieve your other financial goals, such as business initiatives or your retirement lifestyle?
• Which growth markers are most important?

Profitability vs. growth: Four ways to shape your metrics

Refine your vision for growth vs. profitability using these steps.

1. Consider your ambitions and objectives

   If you hope for your company to be acquired or plan to take your company public, then high growth may be your business’s most important metric, as it can attract investors and buyers. On the other hand, if you plan to retain your business and perhaps ultimately hand it down, then consistent profitability will likely be the most valuable.

2. Assess the stage of your business

   The younger your company, the higher impact growth will have on your success. For example, brand-new companies will need to be laser-focused on growth, which could cement their position and market share, so they can begin generating revenue. By contrast, growth is often less crucial to mature companies’ success, although it’s certainly still a major factor. A well-established boutique consulting firm, for example, can increase revenue by focusing on client relationships: retaining its best-selling customers and expanding services to its existing customers rather than investing in rapid new-business development.

3. Determine your positioning in the industry

   Where do your products and services place you in the industry? A consumer tech company may, for example, prioritize growth through user acquisition efforts to achieve its next milestone. But a manufacturer may find its growth and profitability initiatives must mutually support each other. Consequently, it could decide to boost its customer base and inventory. If you are strategic about what your position is, you can better determine your own milestones and progress toward them.

4. Poll your stakeholders

   If you’re an independent business owner, you likely have more freedom to chart your own course. However, companies beholden to investors may have a fiduciary responsibility to concentrate almost exclusively on profitability.

Finding the optimal balance between profitability and growth can be critical to the success of any business. The challenge is to maintain stability while laying the groundwork for ongoing expansion.

Profitability vs. growth: Cash flow conversations

“When reviewing your business’ finances and goals with your relationship manager, it is important to understand your cash cycle,” notes Stiffler.

Understanding the time required to convert inventory and receivables to cash provides a good gauge to a business’ financial health and potential future liquidity needs. This may help ensure bills are paid on a timely basis, influence suppliers with better credit terms, and when needed, provide access to capital through various lending options.

Three things to do:

1. For more guidance on managing your business’s finances, speak with a Commercial Relationship Manager about commercial lending options or visit regions.com/commercial-banking.
2. Learn the secrets of fast-growing businesses.
3. Consider various ways your business can commit itself to focusing on growth.