Profit Is NOT A Dirty Word!
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Contrary to what most politicians are telling the American people, profit is not a dirty word. America is founded on the free enterprise system. Those that want to be creative, are willing to invest their own time and money into a business, are given the opportunity to make money. If someone works hard, produces something that people want to purchase, the company makes money.
I remember listening to Fox News where the discussion was on discontinuing the Bush tax cuts. Brett Hume was one of the participants in the conversation and made a statement that I will never forget. Brett said, “It is immoral for the government to take 55% of a person’s income just because they are successful!” I am not against helping my brother; in fact, I think that we should help others if we can. I am against allowing the government to take my money as taxes and distribute it wherever they see fit.
Profit is not a dirty word. On the contrary, profit is necessary to continue to grow a business. Why is profit needed?
Receivables – When most companies are small, it is not unusual to have $20,000 or $30,000 outstanding. Being small greatly hampers cash flow. As the company grows receivables may have increased to perhaps $80,000. How is the company owner supposed to finance the additional $60,000 tied up in receivables? Well it comes from making a profit and using those profits to fund the receivables of their growing business.
Inventory – The same principles apply to inventory. A small company may have $10,000 or $15,000 tied up in inventory. However, as the company grows the need for more inventory grows. Now the company may need $50,000 in inventory. Again, how is the additional $35,000 or $40,000 funded? It’s funded by the previously made profit.
Expansion – Growing companies need more space, technology, additional locations, and more equipment. Business funds expansion with previously made profits.
Profit is absolutely essential to any business. No profit, no growth. It’s just that simple.
According to Junior Achievement’s (JA) website, 330,377 Junior Achievement volunteers teach 379,968 classes to 9,795,485 students a year…that’s 26,837 students a day and nearly 1,118 students every hour who become empowered with the skills to create a better tomorrow for themselves and their communities!
JA Worldwide is a partnership between the business community, educators, and volunteers — working together to inspire young people to dream big and reach their potential. JA’s hands-on, experiential programs teach the key concepts of work readiness, entrepreneurship, and financial literacy to young people all over the world.
There used to be a Junior Achievement chapter in our town. It taught high school students how to start small businesses, how to create a business plan, sell stock, and raise funds for their new business. Each mini-business produced a product, or service, and if they made a profit, their investors received a dividend. The organization teaches young people about the free enterprise system….and the need to produce a profit.
Unbelievably, 87% of businesses in the USA have 25 employees or less. Small business is literally the fabric of this nation. Small businesses produce jobs. Those employees pay taxes and spend money boosting the economy making it a win-win for everyone. Don’t let anyone tell you making a profit is bad. Without profit, companies fail to expand. No expansion means the company, and therefore the overall economy, are stagnant which, eventually ends in going out of business.
I love being in business and I am confident you do too. We each provide products and/or services that are of value to someone else. Be proud to be a business owner and be proud your company is making a profit. Profit is not a dirty word, it is absolutely essential for the future of your business. Pass on the good news to your friends, neighbors, and those in politics. Remind those politicians that if you don’t make a profit there will not be anyone working to pay taxes…..and therefore no one to pay their salaries!
Stand up and be counted. Help those around you understand what profits are.
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Posted In: ACCA Now, Management, Opinion
