Article
Profit - It Is The Bottom-line!
December 20, 2000 -- Small business owners, executives, and managers are always being challenged to maximize performance. Yet, so many strive for the all important increasing sales without considering the best way to achieve what keeps all companies in business... PROFIT!
Profit or net income before taxes are what every business should be striving for whether you are a small Internet based company or a multi-billion revenue corporation. And while sales are relative to the size of budget, profit is the true measure of success.
Even Internet IPO success stories . . . will be short lived, if profitability is not achieved before investors’ patience become critical. The stock price can go just so high if there is not the means to pay dividends. Just look what happened to the technology / Internet stocks since the spring of 2000. Those that were hit the hardest in stock price decline have yet to prove themselves at the bottom line!
And if the red flow does not turn black soon for many . . . the treasure chest that is being robbed to pay ‘Peter’ will become empty. It is just a fact of business life that the net income needs to be delivered consistently for any business to remain solvent.
The same applies to a small business . . . if it does not have the profits to provide salary increases and basic benefits for its employees let alone for growth via marketing on the Internet and offline. Unfortunately many good entrepreneurs fail to see how these two aspects can be so intertwined that even a very profitable small company can quickly see itself slip away when employees are not rewarded for the profits they generate. It is not just the margin of a product and/or service, but how a company might save money through vendor selection, policy development, or other means. Moreover, incentive programs, affordable benefits, and other humanistic programs can produce profits above their cost because of employees striving to do their best for the company.
Yes, an oversimplification that is limited by the size of the company and the financial ability to provide. However, one must start some where to build towards greater success and profits along with retaining good employees.
Educate yourself and at least your key employees . . . by keeping abreast of competitive developments; new marketing techniques; new business and Internet software programs; new business trends; possible strategic alliances, partnerships, and acquisitions; listening to your customers, and anything else, including outside assistance, that might be the difference in maximizing profits. It also means that short-term income might have to be sacrificed (not lost) to achieve long-term annual net income.
Strategic planning . . . is an excellent business discipline that will help even a small business to educate and guide itself. Developed and implemented properly, it becomes the road map to optimizing profit associated with the sales forecast and minimizing loss during severe economic and/or competitive situations.
This vital business approach, which many small businesses including those on the Internet do not practice, should be done annually with a three to five year look into the future. What you do now, this year, should be for what you are trying to achieve in three to five years.
So never forget that while dollar sales are great, they must result in a profit. (Time does not permit my thoughts about percentage profit versus dollar profit.)
Wishing you good profiting online and offline!
David G. Bancroft
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