Profit is Everything!
Profit is everything in my book!
Whilst talking turnover in a bar or restaurant might sound impressive, the reality is that it’s actually a really misleading way to measure the success of a business.
For many entrepreneurs, managing directors and business owners, turnover is often cited for future financial goals too.
I’m not sure which is worse but if you set out to achieve a given turnover by a certain date, you are probably more likely to be creating a business that will actually fail in the short to medium term.
The reason for this is that turnover hides the details and those details could have a very positive or very negative impact on your business.
Before I go any further...
I should say that I am not saying that profit should come before safety, customer service, product or service quality, unless that level of safety, customer service, product or service quality is accurately aligned to what customers expect.
I can think of a number of airlines that I’ve used over the years that aggressively pursue profits to the point where customer service is almost invisible.
But, I know what I am getting when I use those airlines.
That said, the low cost / low profit business model can work brilliantly when you can sell to the masses.
But, if you’re selling lots of products that don’t give you any meaningful profit margin...
you are busy achieving nothing of consequence and you are probably on the road to business failure.
Clearly, there are businesses that spend billions on ensuring their products or services are safe whilst others spend a minuscule amount.
Both businesses survive because they serve different customers with different needs and budgets.
By the way, I am not dismissing the balanced scorecard, stakeholder theory, or the corporate social responsibility or environmental responsibility of businesses either when I say that profit is everything.
But, for young guns just starting out or business owners that have been going for a few years, dashboards that measure performance across a number of metrics are not really useful.
What is useful is focusing the activities of the business on activities that will lead to a profitable and sustainable future.
This in turn might mean that their businesses grow to such a size that makes these broader metrics become more important.
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The sad truth is that the vast majority of businesses won’t ever get into a conversation about deeper performance metrics because they will fail.
Why?
Focusing on turnover instead of profit, I put to you, is one of the key reasons for this and something that I am passionate about changing.
All these business failures and the impact that has on families all around the world is what bugs me and why I am shouting from the rooftops that profit is in fact everything!
Because if you are talking turnover and focusing your business activities on growing turnover without having a clear understanding of what this will mean in terms of increased or reduced profits you are blindly heading into a world of problems that you may not recover from.
To me, the whole culture of talking turnover needs to change.
And, if every entrepreneur, business owner and managing director out there stuck an A4 sheet of paper on their walls with Profit is Everything! typed across it, we’d probably see more businesses succeed.
I would personally love to hear people chatting in bars about their profits, their most profitable customers and their most profitable products or their most profitable services.
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