Managing Your Business Series with Tate Holt: Why Does Your Business Need to Turn a Profit?
Topic: Managing Your Business | Comments (1)
During my conversations with small business owners, profitability is a frequent topic. The majority of owners focus on how to increase the profit of their business and a smaller segment is driven by a “tax-avoidance” strategy.
Let me reframe an earlier question I posed, “how much profit do you need,” to a broader issue: “why do you need to make a profit?”
I’ll skip over the arithmetic part about having enough money to pay your expenses and won’t address the benefits of retained earnings. Instead, let’s focus on a simple premise: you need money to fix mistakes.
Every CEO/owner makes mistakes. Successful owners simply make mistakes that are inexpensive to correct. Big mistakes, however, can ruin an enterprise – no matter the size of the company.
As an owner, your job is to think about the “big picture.” You don’t have the luxury of thinking only about your business operations. You have to constantly consider your market, your competition, and everything else as well. You’re human, and you’ll make a mistake or two. If you’re good – or lucky – the problems you face will require quick and inexpensive responses. Some issues, however, are global, impact all of us, and have neither fast nor cheap solutions.
One thing is certain: if you’re not profitable enough, you won’t have the cash and capital reserves you need to address – or even just cope with — the macro issues facing us all.
What concerns you the most? Is it the economy, the availability of credit, taxation and government compliance, or labor issues?
Drop me a line and let me know!