Like the law of gravity, the Law of Profitability does not change over time. Everyone knows that a business must make enough money to pay all its bills but often employees and customers forget that businesses are in business to make a profit. Knowing what your profit does for your business needs to be clear. Profit is key to fueling growth, capital improvements, employee bonuses, corporate sponsorships, having “rainy day funds“, and rewarding the risk takers.
If you wonder what people think your business does with your profit – ask. You’d be surprised! Here is what I’ve heard in the trenches over time to the question “what does this company do with profit?” :
- “Bonuses are paid to key employees”
- “New computers were purchased”
- “This company is profitable?”
- “At the end of the year, management always buys stuff that we really don’t need but the accountant says to do it.”
- “We always have losses so we don’t pay taxes”
- “Owner(s) buy toys or pay themselves bonuses”
All kidding aside, minimizing taxes is something that good business owners do, but profit and cash flow are hugely important to the survival of a business. Sharing information about what your profit is doing, helps employees follow your aspirations and provide better understanding of their long term commitment to your company.
Profit is a good thing and without it, businesses will not thrive – that is the unwritten law of profitability. Thriving in business is a great goal and knowing where your business will be in 5 or 10 years is something that will help you keep great employees and customers. Get a quick scorecard on how your business is moving to Thrive –> Scorecard