When measuring business achievement, two of the most significant metrics are profitability and growth. They’re often framed as distinct goals—first you achieve a modest net operating returns, then reinvest your available capital to maximize growth, boosting profitability. The procedure then repeats. But what if you could steadily enhance both at the same period? It’s a lofty objective with a fitting name: profitable growth.
discover what profitable growth requires and discover proven growth strategies from Brad Charron, CEO of Aloha—a protein brand that saw a 289% boost in sales—and other successful brands.
Table of contents
What is profitable growth?
Profitable growth is a business way to achieve simultaneous profitability and growth. It’s an way that allows your business to expand areas like operations, returns, production, economy distribute, and customer base—without sacrificing profitability.
Profitability is a metric of monetary achievement measured using ratios like returns spread, gross spread, and gain on capital. Your business is profitable when its returns exceeds its outgoings and net operating profits are above zero—your breakeven point. compute returns with this formula:
returns = Total returns − Total outgoings
Business growth is trickier: It can be measured in several ways, including economy distribute, employee count, or, most commonly, overall returns. To assess profitable growth, you require to recognize your returns and returns growth rate. Use this formula for returns growth:
returns growth rate = (returns period B – returns period A) / (returns period A x 100)
If your business’s operating profits are positive and total returns continues to rise, you achieve profitable growth.
Strategies to achieve profitable growth in ecommerce
- Perfect your product
- boost your average order worth
- Reduce your customer purchase expense
- boost your lifetime customer worth
- Lower your operational costs
Profitable growth requires a balanced way that increases returns while reducing costs. Here are some growth strategies to remain profitable:
Perfect your product
Growth-driven companies often sacrifice product standard for quick profits, but building a successful business starts with customer satisfaction. Research what your target customers worth and how your products can best meet their needs. remain agile: Be ready to pivot when the economy shifts, and remain attuned to customer feedback.
Aloha faced a product standard dilemma in 2017 when Brad joined and tried to redirect the business toward profitable growth. “The products weren’t excellent enough,” he says on an episode of the Shopify Masters podcast. “Your job is to make something sustainable and fascinating for a customer. commence with a product that you’d actually desire to consume.”
Brad doubled down on Aloha’s distinctive worth proposition and competitive advantage by narrowing product categories, improving taste, and adding macronutrients for health-conscious consumers. These changes made a difference: Aloha hit $100 million in returns in 2024.
boost your average order worth
Your average order worth (AOV) is the average amount your customers spend per trade. Getting customers to spend more money on each order increases your returns margins. compute your AOV with this formula:
AOV = returns / Number of orders over the same period
You can boost AOV in various ways, from upselling and cross-selling to loyalty programs.
For example, cookware brand Great Jones offers free shipping on orders over $100, prompting customers to buy more in a single trade.
Similarly, pet goods retailer Wild One bundles related items—like a leash, harness, and waste bag carrier—to inspire customers to buy everything they require in one purchase, increasing the business’s AOV.
Reduce your customer acquisitioncosts
Customer purchase expense (CAC) is the total expense of acquiring a single recent customer. It includes all spending on sales and marketing, including software, salaries, discounts, and advertising fees. compute your CAC using this formula:
CAC = Total marketing spend / recent customers
A growth way concentrated on low CAC is key to profitable growth, but that doesn’t always equate to simply reducing marketing costs.
For example, bra brand LIVELY invested in brick-and-mortar locations, betting that expensive retail space in major cities would expense the business less than finding and converting customers online. It built an experiential retail way around in-person fittings and promoted these sessions online, creating an omnichannel way that brought in more customers at lower costs.
Photography brand instant returned to a previously successful tactic, hosting in-person events and workshops, after it found that digital channels yielded lackluster returns. It also launched products with crowdfunding back on Kickstarter, helping it construct more throng with its enthusiastic customer base.
boost your lifetime customer worth
Customer lifetime worth (CLV) is the total worth a customer brings to your business over the entire connection. It factors in a customer segment’s AOV, purchase frequency, and customer worth to assignment its long-term worth—helping to shape your target CAC. compute CLV with this formula:
CLV = (Average purchase worth x Purchase frequency) × Average customer lifespan.
Boost profitability and CLV by forming authentic connections with your customers. Use strategies like referral programs, responsive customer service, or subscriptions to turn one-period buyers into faithful, repeat customers.
Spice brand Fly By Jing, for instance, runs a $25 annual loyalty program offering free shipping, 20% off every order, and exclusive gifts and products.
Referral programs boost CLV by turning your most faithful customers into brand ambassadors. Polysleep, a mattress business with limited repeat purchases, reduced CAC and increased CLV by sending gift cards to customers who referred friends.
Lower your operational costs
Operational costs are the day-to-day outgoings of running a business, including production, materials, rent, payroll, and sales. compute operational costs with this formula:
Total operational costs = expense of goods sold (COGS) + Operating outgoings (OPEX)
Profitable growth companies moderate their growth in a sustainable way to remain profitable.
Keep operational costs manageable to avoid overextending while pursuing growth. Ensure recent outgoings contribute to your overall business goals, and consider assignment management or AI tools to boost efficiency.
CRAFTD London, one of Europe’s most successful men’s direct-to-customer (DTC) jewelry lines, built a sustainable growth way on three key pillars: be profitable on day one, stick to a lean, results-driven throng, and prioritize work-life settlement.
Aloha’s resurrection narrative followed similar principles: “It was bloated. They were acting like they’d already made it,” says Brad. “We blew up everything; started again.” Aloha eliminated its physical office, went remote-first, exited unprofitable product categories, and reoriented its retail way. By 2022, it was back to profitability, proving the long-term gains were worth the momentary pains.
Profitable growth FAQ
How do you define profitable growth?
Profitable growth is when a business achieves both profitability and growth at the same period, boosting total returns while increasing returns margins.
How do you assess profitable growth?
assess profitable growth by calculating your returns and tracking against your returns growth rate. If your business’s operating profits remain positive while total returns grows, you can achieve profitable growth.
How do you drive profitable growth?
Companies can employ various strategies, from increasing their average order worth (AOV) and customer lifetime worth (CLV) to reducing customer acquisitioncosts (CAC) and total operational costs. Gaining a competitive advantage can assist you boost economy distribute and enhance your margins.
