Is More Revenue Building a Bigger Business or a More Valuable One?

Recent research released by Xero has found that “more than one in three (35%) small business owners don’t often know whether they made a profit in the last month”.

Xero tracks sales, jobs, wages and payment behaviour using aggregated data from businesses using its platform. Their analysis of the broader Australian picture shows that while sales are still growing, the rate of growth has slowed considerably. In what Xero calls a two-speed economy, businesses are becoming more cautious.

COSBOA & Commonwealth Bank’s 2025 Small Business Perspectives Report states that 64% of small businesses reported lower profits than last year. Rising business costs were cited as the biggest barrier to growth. In many cases, the owners carried the financial burden. Almost three-quarters expect costs to increase again in the next 12 months, meaning profitability will remain constrained even if demand improves.

We often use sales as a measure of growth. We celebrate reaching $500,000, $1 million or $5 million in turnover. Revenue is visible and easy to measure. But does an increase in revenue actually mean the business is getting stronger?

Extra revenue doesn’t mean additional value

A retailer I met a few years ago was new to business. Their revenue at the time was just under $500,000. Their goal at the time was to reach $1 million in turnover by the end of that year. A SMART goal on paper. But was it the right goal?

Determined to reach their goal, they negotiated to manage another agency that sold the same product for a relatively low management fee with the intention of purchasing that agency after one year.

Why was $1 million important?

Was it simply a target? $1 million is a memorable number - somewhat a symbol of success. They may have felt that $1 million indicated they were moving from a small operation to an established business, a sign that the business has grown up.

But what does $1 million in turnover tell us about a business?

It doesn’t tell us if the business is profitable.

It doesn’t tell us if the business generates cash.

It doesn’t tell us how many hours the owner works in a week.

One additional part to this story – they didn’t find out what exactly they were taking on. The agency they agreed to take on was not well run. The distribution team wasn’t great, stock was not properly tracked, their customers didn’t pay on time and that put pressure on the cash flow. The management agreement gave that agent an opportunity to relax and leave the day-to-day to the new management. After all they were paying a small fee to the new management.

The arrangement was exhausting for the new management. Most of their time was taken by the second agency, they were falling behind in their own day-to-day management. Staff felt pressured, absenteeism was high. Cash flow pressures were high, and the small management fee was nowhere near enough for the effort involved.

On paper they were building a bigger business, but did they build a more valuable business?

Revenue is one measure of activity. Value is what that activity creates.

Would you rather own a $2million-turnover business that gives you $50,000 and needs you there six days a week, or a 1 million-turnover business producing $200,000 that can operate without you?

What if the $2 million-turnover business is building something much stronger tomorrow?

What if the $1 million-turnover business relies on one customer for half of its revenue?

Revenue alone doesn’t give us enough information to decide which business is better.

Perhaps the better question isn’t “How big do I want my business to become?” It’s “What am I actually trying to build?”

That’s one of the questions we’ll explore in Build for Choice masterclass series starting later this month. Stay in touch for updates.

Sources: Xero, Financial Fitness research, August 2026; COSBOA & Commonwealth Bank, 2025 Small Business Perspectives Report.

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Towards Growth is a strategic business advisory and mentoring practice.

The ideas, insights and client stories we share come from our own work and practical experience, with AI used for editorial support.

The Revenue-to-Value Model™ is a proprietary framework of Towards Growth.