What is the concept of sustainable income?

A Firm's Consistent, Steady Income

Sustainable income is income which is consistent and steady over time. Typically this income results from having honed a combination of accounting practices as well as marketing approaches. Sustainable income is created in this manner starting from the accounting side and refining marketing practices such as pricing in order to maximize sales and profit.

For example, if the price of a good is $1.00 and sells 10,000 units profitably, then achieving this income sustainably may require watching competition and making price adjustments remain competitive. More than staying abreast of the competition price should be adjusted to maximize sales over time in relation to demand. 

Another method of achieving sustainable income is to expand marketing channels. Often companies will use intermediaries to sell products and this provides greater access to the market to achieve income without creating new divisions, thus maintaining cost while achieving more but slightly less income.

Simply, speaking a firm will look at the profit and revenue from its products and services and attempt to adjust costs and prices in order to increase sales and revenues. One can see this practice in larger more established companies. For example, McDonald's provides a clear understanding of sustainable income via its income statement.

As one can see the revenue is steady with some ups and downs but it is consistently growing over time. This sustainable income has been achieved by the company refining its marketing and sales practices and establishing pricing which meets the market demand as close as possible.

References

Yahoo Finance. (2014, February 18). McDonald’s Corp. (MCD). Retrieved February 18, 2014, from Yahoo Finance: http://finance.yahoo.com/q/is?s=mcd

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Photo by Katie Harp on Unsplash

Article Updated: 11/04/2021