Profit is the Motivation For Managing a Business

Building a business is a challenge. Most people measure their success in business by the size of their turnover. The problem is that as you increase turnover so your costs rise proportionately more. You end up proportionately with less and less profit but a higher turnover.

Very few people in business spend enough time and effort analyzing which parts of their business are the most profitable versus least profitable.

They don't analyze:

· Which customers produce the best net profit and which customers don't.

· Which products or services produce the best net profit and the ones that don't.

· Which areas produce the best net profit and which areas don't

· Which salespeople produce the best net profit and those that don't.

They let the low profit factors consume the same resources as high profit factors. They somehow justify continuing to keep alive practices that should be eliminated.

Money is often wasted on fancy offices, vehicles, staff and things to impress people that have no profitable purpose. There are two fundamental questions to ask. They are,

- How does this contribute to net profit?

- How much does this contribute to net profit?

Everything else is immaterial. All the other benefits that do not contribute to profit should be questioned thoroughly and rigorously. Doing things in business that do not contribute to profit are poor business practices.

Without the analysis to identify the high profit earning factors in your business, your income and financial stability will be threatened. You will be vulnerable to downturns in the economy and variations in the marketplace.

Without this analysis you may have difficulty following two fundamental laws of business.

The first law is, "Pay yourself first." As you can understand, this is very difficult unless there is sufficient profit for you to do this.

The second law is, "Take a predetermined percentage off the very top and don't spend it. Put it in a sound investment and leave it alone."

You can only comply with these two laws if you have the necessary profit to do it. Too many people in business are content to sacrifice their income for the sake of their business. This is a very limiting philosophy.

PLMitchell is a business consultant who has helped many businesses to lift their labor productivity in the workplace at little or low cost.

His practical guide The Key To Productivity should be on every manager's desk and used to install your productivity improvement program.

Download your FREE booklet on increasing workplace labor productivity. Go NOW to http://www.thekeytoproductivity.com/

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