Profitability level, post #2

Profits continued... If you did not read the first part of this post, you find it here

In my last post I asked about profits and your view and I also asked your view on should we or should we not re-invest our profits into the business?

This is of course not a simple one liner answer, but some thoughts below to bear in mind.

1. If profits are not growing something else is wrong. Often pricing, this is a whole huge topic in itself. In my view, and from experience, probably 80-90% (that number comes from speaking with owners, not an exact science), of company owners do not charge enough.

2. Putting almost all of our profits back into our busienss means that we can spend 20-years working on a busienss but have not built any real wealth. The busienss is supposed to do that, this is not a good place to be in and should immediately be rectified.

3. In addition to point two, when someone is selling their business, in their mind they then need to get enough money out to cover for all of those 20-years of work, which might not always be so easy. This causes other issues, delays in selling, a need to accepting deals which are not perfect etc., frustration and despair.

4. Putting all of our profits back into the business makes total sense if we are growing at a high rate, and instead of going to the bank borrowing, or diluting ourselves with an equity investors, we can instead use our own cash flow to speed up and drive great growth in our business that will increase the value, and also bring you much higher cash flows in future that you can benefit from.

5. A discussion around the profit level in terms of the services we deliver to clients. Can we charge clients more right now, or do we need to improve our service/products?

I can go on and on about this because often owners seem to forget that the profits is really why we are in business. With strong profits, we can improve the outcome for ourselves, staff, clients (yes clients too), even the village/town or geographic zone we operate in since we can support local activities.

So let's bring back the focus on profits, and make sure that we do everything in our power to make sure that we get paid for the risks we take as company owners, and that we can also reap the rewards.

It will make everyones life better.