This may seem like a very easy question to some - and for others it may seem way out there. Either way - let's talk about profit. Using a standard dictionary to define this word - profit is the leftover money in a company after all expenses have been paid. It is usually seen as extra or more than what is needed.
Interestingly though, many entrepreneurs that I work with seldom have 'leftover' or 'more than' or 'extra.' Why is that? Well, there are multiple reasons this can happen in a company - but let's look at two.
First, this can happen because we did not plan to have extra. Many times we price our work or services to just get the job and to pay the bills. We don't plan to have more than we need in our pricing because we want to be fair to the consumer often at the cost of the company. What good does it do to be 'fair or reasonable' to our customer if we are also not being 'fair and reasonable' to our own company? How long can a company exist that never takes the needs of the firm into account? Not long. How fair and reasonable is it to do what is great for the client and then not be in existence the next time the client needs us because we did not plan for the future?
Second, I see a lack of profit even with planning to have it included in our pricing structure, due to poor money and expense management. Making money is one element to success but not the whole picture. Having money to pay salaries and to make a profit is the 'rest of the picture.' We have a tendency, if not watching and aware, to spend what we make - every last cent. We all know it is true. When is the last time you had a twenty dollar bill in your wallet and can account for every penny that was spent? It is easy to spend what we have and then wonder where it all went.
Profit is not something that happens by accident in most cases. Planning to have the company make more than is necessary to pay the bills then managing the expenses to allow for that profit to exist takes hard work and dedication. The Profit First method of bank balance accounting helps with this process and has been a lifesaver for many.
If you want to know more about the Profit First method and how it relates to the Interior Design or Custom Drapery Workroom industries give me a call. You can also check out the Passion for Profit course which self-guides you through implementing these principles in your own business. Make a profit, save for profit, use your profit wisely!