Increased Income Can Be Misleading

The pandemic fundamentally changed household consumption habits. Families who had to stay in Israel instead of travelling abroad on vacation invested their spare money on their own homes and, significantly, also on their yards and gardens. Demand for swimming pools, gas grills, sporting equipment and the like went through the roof over the last year and a half, and demand continues to grow. For businesses that import such products, this trend allows them to significantly expand their income.

At the same time, it is important to emphasize that such expansions also require structural changes and investment in organizational infrastructure, such as a wider distribution network, more storage space and more. Expanding too quickly without the suitable infrastructure can lead to severe long-term operational difficulties. At the same time, a sharp increase in revenue can be misleading, and lead to an increase in fixed expenses and staff size which could result in losses if the increased revenue turns out to be a temporary bump. That is why it’s vital to carry out a detailed evaluation of the data under differing circumstances, ensuring that even in extreme situations, the company will be equipped to provide a high level of service to its clients and remain profitable.

The writer is an expert in consulting and coaching business skills and a lecturer at the Bank Hapoalim Center for Financial Growth.