Importance of Profit

I think the use of the word profit is fascinating.

Profit in Business

Given the talk today about having our economy trend toward a type of socialism, it seems import to remind ourselves of the importance of making a profit in business.

The success of a small business depends on its ability to earn profits. Profit equals a company’s revenues minus expenses, which means you take in more than goes out.

Earning a profit is essential to a small business because profitability impacts whether a company can secure financing from a bank, attract investors to fund its operations, and grow its business. Companies cannot remain in business without turning a profit.

Business owners and entrepreneurs must understand the importance of profitability in business management and develop strategies that give the company the best chance at remaining profitable.

Profits by Business

Profits of your business result in many beneficial activities.

  1. Save for a Rainy Day. The first thing you should consider when you have a profit is your savings. Do you have an adequate rainy-day fund to cover your working capital needs in case of an emergency expense or an unexpected revenue slowdown?
  2. Company Morale.  An indirect benefit of making money is that it positively impacts company morale. Owners naturally feel better about their time, energy, and monetary investment in operating the business when they are making a profit. Employees also take pride in knowing they work for a profitable, successful company.
  3. Reduce Debt. The old adage that you can’t go bankrupt if you don’t have any debt equally applies to corporations as it does for individuals. Of course, smart business leaders know that using an appropriate amount of financial leverage is a beneficial way for businesses to increase their returns.
  4. Corporate Social Responsibilities. Profits allow corporations to donate money both directly to charities and indirectly through a corporate-sponsored foundation. Giving to social responsibility issues is a great way to access tax and financial benefits, enhance corporate image, and make a difference to your community.

Profit from Business

Also, there are types of profit that do not include money.  John Maxwell is credited with saying.

A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.

Small businesses provide a great deal of benefit (profit) to the communities where they reside.

  • Community Identity. Take a stroll down Main Street, and you’ll likely notice that your community has its unique character and charm. Many municipalities and tourism boards have prioritized preserving the unique character a vibrant small business community creates.
  • Community Involvement. Small business owners are an integral part of the communities in which they live and work. Local small businesses and entrepreneurs tend to be deeply involved in their communities
  • Community Health. Small business owners help to build a sense of community. Their companies tend to be people-oriented and are more likely to develop personal relationships with their customers, knowing many of them by name.
  • Local Jobs. Small businesses are job creators, and most of those jobs are local jobs.
  • Small businesses are the product of the business owner’s entrepreneurial spirit. By starting a small business, the business owner is taking charge of his or her future.
  • Diverse, Locally Made Products and Services. One-of-a-kind and locally made products can attract customers to a community, bolstering tourism and contributing to the local vibe.

The Bible

The pressure to maximize profits continues to be exerted on nearly all businesses.  And while making a profit has lots of benefits, Matthew 6:24 says.

No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money.

Followers of Christ understand that this verse does not say to forego profits, to hate wealth-creation, or to avoid money-making ventures.  What his verse says is we cannot let the act and intent of those activities be our master.

What we are to do is to do well while doing good

We cannot donate time and money without first making a profit.  We pay more in taxes if we make more profit.  And our ability to benefit our communities is increased when we make more profit.

            By all means, make a profit with your business.  And be sure to do good with money from your profits, glorifying God at all times.