Why Making Profit is a Good Thing

Let’s talk about profit.

Do you feel uncomfortable already?

How about ‘sales’ or ‘revenue’ – are those easier to deal with instead?

It’s interesting how words can be loaded with a negative association. Too often, the media’s unsavoury portrayal of profit makes it a dirty word, with headlines slanted toward their story angle such as “putting profit before the customer”. With the portrayal of taking something away from someone, the subtle (or not-so-subtle) messaging around ‘profit’ in a shameful or negative context has a powerful impact on our psyche.

For many reasons, the topic of profit has become stigmatised and associated with greed, or attained only at the expense of customer service, quality products, and employee wellness.

Whatever your comfort level is with it, we’re tackling the taboo topic of profit, and why it’s a good thing. Without it, none of us would be in business.

Businesses Need to be Designed for Profit

“I was mentoring some graduate students at a local university recently, and I sensed that profit seems to be a dirty word these days to many aspiring entrepreneurs. I’m certainly not a fan of customer rip-offs, but even non-profits have to be cash-flow positive, or have deep pockets, to help anyone for long. Every business needs to develop a revenue model even before a product.” – Martin Zwilling, Founder and CEO, Startup Professional

The definition of ‘profit’ is a financial gain. That’s it. Not financial gain as a result of the suffering of another. Although that can and does happen, it is only one of many ways to approach getting a profit. As with money, profit in itself is neutral, but the attaining of it and use of it has a higher and lower expression.

At its highest expression, striving for profit fuels the entrepreneurial spirit, innovation, creativity and invention, and produces excellence. It’s not only good to strive for profit; it’s the fundamental driving force for society to progress and move forward.

As a business owner, you take risks and work hard. Therefore you deserve to make money! It’s not about getting filthy rich and walking over people to get there. Rather, the positive attributes of profit should be recognised. It gives you more options for things like:

  • Growing the business so you can create more value for customers, and have a positive impact on your community.
  • Creating prosperity and opportunity by employing more people and helping them have a better life.
  • Contributing to causes you care about.

Ironically, often people who aren’t making profits are driven to unscrupulous actions to save a dime or make a buck. Being constantly stressed because of no profit results in a stressed working environment, and is harder on employees.

Profiting Unapologetically

A great merchant delivers both joy and profit. Then profit gets reinvested in more joy.” – Andy Dunn

Businesses and organisations need to profit to exist, create employment, and continue making a difference in the world.

As an entrepreneur, being in business is your opportunity to do something meaningful, provide products or services to customers that value them, and succeed on your terms. The more profit or surplus you can create, the better value you can deliver.

The team at BW Miller Dean can help you design your business for profit by putting processes in place to steer it in the right direction so you can achieve your revenue goals. Contact us today to see how we can help boost its profitability.

How to Stay on Top Of Your Business Finances

Finances aren’t sexy. But ignoring that part of your business can have a detrimental impact on your business.

Does this sound familiar? 

“If I work hard, my finances will sort itself out.”

“I’m too busy to worry about the numbers now.”

“I don’t understand accounting; my accountant can sort it out for me when my tax bill is due.” 

Simply put, these beliefs are wrong. Here’s why:

  • If you work hard you may be successful. But that’s not a guarantee. You may work on things that aren’t profitable or that don’t move your business forward in any way. The key is to work hard on the right things. And you’ll only know what the right things are when you delve into the numbers.
  • You may be too busy because you don’t have a handle on your finances. You may spend time on unproductive, non-profitable tasks without even knowing it.
  • You can’t wait until the end of the year to analyse your numbers. It would be too late. If you want to succeed, especially in such an uncertain time as now, you should plan ahead, measure your performance regularly, and make strategic decisions as and when they’re needed.  

So, what should you do instead?

 

Turn Your Vision into Measurable Numbers

It all starts with developing a vision and a plan for your business. 

Once you’re clear on what you want to achieve, you should put numbers around your vision. For instance, develop a cashflow forecast and other performance metrics that would help track how you’re doing against your goals. 

You should also measure your metrics on an ongoing basis and use the numbers to make the right business decisions. For instance, if you’re finding that one of your services is unprofitable, you may want to drop it like a hot potato, and channel your marketing bucks towards a more successful product. Or you may decide to work on improving productivity in your production team. 

 

Which Financial Metrics Should You Measure?

There are many financial metrics to track. Trying to cover them all may be overwhelming. Instead, focus on a few ones at the start, and add more as you begin to understand your finances better.

Here are the most important financial metrics to start with:

 

Your Cash Flow 

Staying on top of how much money is flowing in and out of the business is crucial. If you don’t plan ahead you may run out of cash just before a pay run, or you may have to say no to a marketing opportunity that can bring in thousands of dollars in the long run.

 

Debtors/Debtors Days 

Keep on top of your outstanding debts and how fast people pay you. If you don’t follow up frequently, you may not be able to recover the debts at all. There’s a saying that people pay those who scream the loudest. 

Everybody is feeling the pinch right now and many businesses are holding on to their money in fear of running out. That is flawed thinking because if everybody stops paying each other, the economy would halt. But if we keep on paying each other, the economy can keep on turning and recover over time. 

As much as we would like to help others out, we need to think about ourselves as well.

 

Profitability

We often put too much of a focus on increasing sales, but forget about profitability. For instance, if you’re in the service industry and things aren’t as busy as usual, you may spread out the work to fit the time you have available. That would increase your labour bill, making the business unprofitable. Instead, look for ways to be more productive and rather spend your extra time on bringing in more clients.

 

Take Control of Your Business Finances

Planning your finances doesn’t come naturally to everybody. Just like we may need your help with a haircut or drawing up a plan for a new house, so do you need our help to make sense of your finances. Get in touch with us so we can help you to stay on top of your finances and take control of your business’ destiny.