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Profit Is A Result, Not A Purpose

October 1, 2019 by JoshPatrick Leave a Comment

I’m really sick and tired of hearing that the purpose of a business is to make a profit. If that’s the purpose of a business, then that would mean the purpose of me doing business with your business is for you to make a profit. Does that make any sense at all?

In today’s video we’re going to talk about why profit is a result and not a purpose. We’ll also be talking about the real purpose of a business….and that is to provide a product or service that our customers are delighted with.


Transcript

I’m really sick and tired of hearing that the purpose of a business is to make a profit. If that’s the purpose of a business, then that would mean the purpose of me doing business with you is for you to make a profit. Does that make any sense at all?

So in today’s video, we’re going to talk about why profit is a result and not a purpose. We’ll also be talking about the real purpose of a business and that’s to provide a product or service that our customers are delighted with.

So let’s jump in and get started.

  1. First, I want you to ask you why you started your business in the first place. Now, I’m gonna bet it’s one of two reasons. You thought you had a better mouse trap or you thought you had a need that your customers needed that they really didn’t know about it, or a potential customer needed that they didn’t really know about it. Those are the two reasons that I see most people start a business. And those are nice purposes to have a business and profit isn’t even in there. It’s about providing a service.
  2. Number two, now here’s something that’s true. Your customers don’t care how much money you make or how much money you lose. What they want you to do is they only care really about you focusing on them. Yes, I get it that your customers really philosophically want you to make money ’cause they understand that if you’re not making money, you can’t service them anymore. But the truth is what your customers really care about is themselves and what your business is doing to help fill their needs. And if you’re not focusing on that, you’re gonna find you don’t have loyal customers who stay with you for a long period of time.
  3. Now here’s number three and this is something it took me a long time to figure out. Your employees don’t really care how much or how little money you make. I’ve had times where my business lost money and none of my employees have ever said, you know something, you can cut my pay this week because you’re not making money. The truth is they really care about themselves and if they’re making enough money. What they do want, they do want you to treat them fairly. They do want you to make them part of your business family. They do want you to use your values with them. But the truth is your employees don’t really care about how much money you make. Maybe they should care, but the truth is in my experience, my employees really don’t care about if I make a profit or I don’t. What they do care about is themselves.
  4. Number four, I’m hoping none of your values talk about profit. No one except you is going to be excited about this. Now, one of the things that I’ve been talking about a lot recently is that when you’re hiring somebody new for your company or you’re working with people in your company, you have to be talking about your values because the values are the reason that a lot of people go to work today with a particular company or not. And if your company is values-led, you’re gonna find you have more excited, more engaged and more interested employees in what you’re doing, more engaged, more interested and more excited customers and the same will be true for your advisors. But if your values that you’re talking about is profit, that our purpose is to make a profit, well, that’s a responsibility. You can’t play the game if you don’t make a profit. We need to be talking about that. But again it’s not something that our employees are going to get excited about.
  5. And then finally, you should be excited about your own profit is something you need to manage. Now, profits can be managed, profits can be improved. We can do things in our business to make our profits larger and we should absolutely do them especially when it helps bring better service and better products to our customers. Just be aware nobody else is going to be excited about your profit even if they tell you they are.

So here’s where profit does need to be talked about.

  1. With your employees, profit allows you to stay in business. So you do need to talk about profit as far as your employees go as a need to be in business.
  2. In your planning, you got to be talking about profit. You must plan for profit. It doesn’t happen automatically.
  3. And number three, with your banker. Bankers do care about your profit because without profit, they’re not going to lend you money. And in fact, if you don’t have positive cash flow, they’re not going to lend you money either. So you need to know not only about your profits, you need to know about your cash flow when it comes to working with your banker.

So if you want your employees to care about profit, have a profit sharing system in your company and share your numbers. Do what’s called open book management where you share the numbers in your company, have a piece of the profit go to your employees. Lots of ways to split that up, but have a hurdle rate and above that hurdle rate, you start sharing the money you’re making. Now you’re going to get your employees to start caring about your profit. Why, because they have a personal stake in whether you’re making money or not.

And I hope some of these things will get you thinking about why you’re in business and where talking about profits fits in and where it doesn’t fit in. Remember, without profit, there is no way you can fill the economic needs your company has. And at the same time, no one is going to be excited about your profits unless there is something in it for them. So give others a reason to be excited, especially in your employees.

Hey, this is Josh Patrick. You’re at the Sustainable Business. Thanks a lot for stopping by. I hope to see you back here really soon. And why don’t you scroll down, leave a comment and while you’re at it, make sure you DOWNLOAD our Free eBook on Simplified Budgeting. It’ll help you get everybody in your company on the same page and you’ll learn about a budgeting system you might even be excited to use. So thanks a lot. I hope to see you back here really soon.

Filed Under: Video Tagged With: budgeting, business purpose, business result, customers, employees, planing, profit, profit-share, simplified budgeting, sustainable business, values

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My main focus in life is helping private business owners create a sustainable business that will last past them. I help create great outcomes using life experiences I’ve had during my almost forty years of running and being around my favorite people, private business owners. I’m a student, an entrepreneur and a curious observer of life. Read More
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