When measuring business success, two of the most important metrics are profitability and growth. They’re often framed as distinct goals—first you achieve a modest net operating profit, then reinvest your available capital to maximize growth, boosting profitability. The process then repeats. But what if you could steadily improve both at the same time? It’s a lofty goal with a fitting name: profitable growth.
Learn what profitable growth requires and discover proven growth strategies from Brad Charron, CEO of Aloha—a protein brand that saw a 289% increase in sales—and other successful brands.
What is profitable growth?
Profitable growth is a business strategy to achieve simultaneous profitability and growth. It’s an approach that allows your business to expand areas like operations, revenue, production, market share, and customer base—without sacrificing profitability.
Profitability is a metric of financial success measured using ratios like profit margin, gross margin, and return on investment. Your company is profitable when its income exceeds its expenses and net operating profits are above zero—your breakeven point. Calculate profit with this formula:
Profit = Total revenue − Total expenses
Business growth is trickier: It can be measured in several ways, including market share, employee count, or, most commonly, overall revenue. To measure profitable growth, you need to know your profit and revenue growth rate. Use this formula for revenue growth:
Revenue growth rate = (Revenue period B – Revenue period A) / (Revenue period A x 100)
If your company’s operating profits are positive and total revenue continues to rise, you achieve profitable growth.
Strategies to achieve profitable growth in ecommerce
Profitable growth requires a balanced approach that increases revenue while reducing costs. Here are some growth strategies to remain profitable:
Perfect your product
Growth-driven companies often sacrifice product quality for quick profits, but building a successful business starts with customer satisfaction. Research what your target customers value and how your products can best meet their needs. Stay agile: Be ready to pivot when the market shifts, and stay attuned to customer feedback.
Aloha faced a product quality dilemma in 2017 when Brad joined and tried to redirect the company toward profitable growth. “The products weren’t good enough,” he says on an episode of the Shopify Masters podcast. “Your job is to make something sustainable and interesting for a consumer. Start with a product that you’d actually want to consume.”
Brad doubled down on Aloha’s unique value 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 revenue in 2024.
Increase your average order value
Your average order value (AOV) is the average amount your customers spend per transaction. Getting customers to spend more money on each order increases your profit margins. Calculate your AOV with this formula:
AOV = Revenue / Number of orders over the same period
You can increase 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 transaction.
Similarly, pet goods retailer Wild One bundles related items—like a leash, harness, and waste bag carrier—to encourage customers to buy everything they need in one purchase, increasing the company’s AOV.
Reduce your customer acquisitioncosts
Customer acquisition cost (CAC) is the total cost of acquiring a single new customer. It includes all spending on sales and marketing, including software, salaries, discounts, and advertising fees. Calculate your CAC using this formula:
CAC = Total marketing spend / New customers
A growth strategy focused 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 cost the company less than finding and converting customers online. It built an experiential retail strategy around in-person fittings and promoted these sessions online, creating an omnichannel approach that brought in more customers at lower costs.
Photography brand Moment 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 support on Kickstarter, helping it build more community with its enthusiastic customer base.
Increase your lifetime customer value
Customer lifetime value (CLV) is the total value a customer brings to your business over the entire relationship. It factors in a customer segment’s AOV, purchase frequency, and customer value to project its long-term value—helping to shape your target CAC. Calculate CLV with this formula:
CLV = (Average purchase value 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-time buyers into loyal, 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 increase CLV by turning your most loyal customers into brand ambassadors. Polysleep, a mattress company 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 expenses of running a business, including production, materials, rent, payroll, and sales. Calculate operational costs with this formula:
Total operational costs = Cost of goods sold (COGS) + Operating expenses (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 new expenses contribute to your overall business goals, and consider project management or AI tools to increase efficiency.
CRAFTD London, one of Europe’s most successful men’s direct-to-consumer (DTC) jewelry lines, built a sustainable growth strategy on three key pillars: be profitable on day one, stick to a lean, results-driven team, and prioritize work-life balance.
Aloha’s resurrection story 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 strategy. 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 company achieves both profitability and growth at the same time, boosting total revenue while increasing profit margins.
How do you measure profitable growth?
Measure profitable growth by calculating your profit and tracking against your revenue growth rate. If your company’s operating profits stay positive while total revenue grows, you can achieve profitable growth.
How do you drive profitable growth?
Companies can employ various strategies, from increasing their average order value (AOV) and customer lifetime value (CLV) to reducing customer acquisition costs (CAC) and total operational costs. Gaining a competitive advantage can help you increase market share and improve your margins.
