PROFIT IS WHYYOU ARE INBUSINESSFROM “FIRE SOMEONE TODAY”BY BOB PRITCHETT
PRIMARY PURPOSEMaybe because it sounds greedy, small businesses inparticular do not generally talk about profit. Instead theyfocus on their secondary purposes: to help individuals findthe best life insurance at the lowest rates; to provide a worry-free roofing future; to bring the authentic taste of Chicagodeep-dish pizza to Podunk, Wisconsin.
PROFIT SUPPORTSEVERYTHINGProfit lets you accomplish your missionProfit supports all your other priorities • Mission • Customers • Employees • Community • Corporate jetProfit must be your first priority • Or you can’t pursue any others
PROFIT PYRAMID Community Employees Customers Mission Profit
IT IS EASY TO BEUNPROFITABLEFall in love with your customersValue quantity over qualityCreate work to keep the staff busyTake projects at a loss to keep them from competitors • Cleverly preventing the competition from having a loss…Fail to correctly account for costsLose a little on each unit and make it up in volume
IT IS EASY TO BEPROFITABLEStare into the face of impending doom • Imagine losing your business • Imagine losing your house • Imagine losing your incomeAttack costs • Cut ruthlesslyPromote sales • Pedal harderUse the Business Decision Making flowchart • It is easier than you think
BUSINESSDECISION MAKING No Is it Don’t do it. profitable? Yes Consider it.
STAND FIRMFOR PROFITCustomers rarely ask you to take their business at a loss • No compunction about asking you to take it at break-evenSpecial discounts and exceptions are like holes in a dam • Resist the temptation to buy the business by forgoing profitNo, it is not a strategic decision / relationship / customer • ‘Strategic’ has a second definition
DEFINITIONstra·te·gic (strə-tējĭk)adj.1. Of or relating to strategy.2. Wasting lots of money: this strategic project will change customer perceptions of our brand.
PUT PROFIT FIRSTProfit is the first mission of every businessProfit protects and enables all the other missionsGoals inspire, cash permits, but profit is whyA business that is not pursuing profit is not a business • It is a hobby • And a black hole • …consuming your • …time • …effort • …hope • …future
HOWTreat profit as an expense • Pick a profit target and consider it as sacred as payrollReserve and set aside profit like any other accruing expense • Can you take profit off the table every day?It is risky to manage expenses against income • Income – Expenses = Profit • Risks expenses = income, resulting in no profit • Income – ( Expenses + Profit ) = Gravy • When profit is an expense, the remainder is gravy
MAKE PROFITA LINE ITEMResearch & DevelopmentCost of GoodsRentPayrollProfitTaxes
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