How single-minded are you about making a profit?

[Steve Roberts]

I was having this conversation with a colleague flying back from Aberdeen last night, after putting to bed a particularly sweet deal?

I've got my own views, which I'll express later, but would be interesting in hearing other people's opinions first!

 

[DuaneJackson]

Can you elaborate?

 

[DuaneJackson]

Making a profit is the ultimate aim of my business activities, but I wouldn't do anything that meant somebody else was badly affected by what I do, financially or in any other way. For instance, taking advantage of a client that might have more money than sense.

Is that what you mean?

 

[fastfences]

I'm not 'single-minded', but certainly, profit is at the forefront of my business objectives. Otherwise, what's the purpose?

I guess there is a wide line between a reasonable profit and an exhorbitant one. But if a business can operate ETHICALLY and make huge profits, is there anything wrong with that? We do shun the huge profits of major banks and instrumentalities, and I think that there, there is a cause for regulation.

Cheers, Nigel

 

[Pebble Communications]

I intend to make a profit on every job that I do but the amount does tend to vary. Bigger companies get charged more than smaller ones, but I enjoy the smaller ones more. I also do give people I network with a lot of advice and help too, and I'm registered to do occasional freebie stuff for registered charities through The Media Trust.

I'm single minded in that if I don't make a profit I will end up homeless and pennyless!

 

[Pebble Communications]

I do get the feeling that I could do a lot more than I do. I get a lot of good ideas for things but they would take over my life for the forseeable future, and quality of life is more important to me than standard of living, if you see what I mean.
My other half says I could make a million if I could be bothered!

 

[KM-Tiger]

It's an unanswerable question as making a profit is not an activity in itself, so you cannot be single-minded about something you cannot do. Profit results from other activities which are many and various.

Pedantic semantics aside, if you run a business then I think you do need to keep making a profit in the forefront of judgements about all business activities. A business that doesn't make a profit will no longer exist, so all aspects of the business should be geared in that direction.

As an extreme example, loss leading is not done as a charitable act to customers, but as a way of increasing sales and profits.

 

[easyasit]

I was having this conversation with a colleague flying back from Aberdeen last night, after putting to bed a particularly sweet deal?

I've got my own views, which I'll express later, but would be interesting in hearing other people's opinions first!

Is this not the whole part and parcel of running a business?

I would do most things, accept break the law, or hurt anyine

Al

 

[DuaneJackson]

I would do most things, accept break the law, or hurt anyine

So does that include things that are blatantly morally and ethically wrong but not illegal?

 

[clairemackaness]

Like Fiona I make a profit on everything I do, but if I know a company will spend then I'll charge them more to allow for me to do deals for UKBF memebers, friends and people I really like!

As I am just starting out though, I cant appear to be too greedy as I am trying to make a name for myself. In time my rates will slowly rise.

 

[Steve Roberts]

I'm of the view that it's critical to be single minded about profit, but it's very easy not to be - especially during times of success.

For example, when one of my managers wants me to spend money on, say, some new software or another building (or whatever) I get them to to illustrate:

1) Will it generate more orders? If so, how many?
2) Will it cut costs, if so how much?
3) If we haven't needed one before, why do we need one now?

Secondly, if like me, you share the profits with all the staff then there's no greater buzz than giving each member of staff a nice bonus. As such, it's great for morale!

However, it's the easiest trap in the world to let your costs spiral out of control. I've always said, the hard half of being an entrepreneur is not sales (most entrepreneurs are good at sales) it's keeping your costs in check! If you're making a GP of, say, 30% and you spend £10k on a piece of kit to do this or that, that means you've got to generate £30k's worth of business just to pay for that one cost.

The moral of the story, from my perspective, is don't let the "tyranny of the urgent" interfere with the basics - my income must always exceed my outgoings. Nothing is more important to have a happy vibrant business.

 

[Jayne]

I think charging big companies more or people who you know to have plenty of money is wrong!

You should charge the same for every customer, unless it is a special promotion for UKBF!

I hate how people charge us more at our shop because we are commercial, it's one of the things that really get my back up. If my freezer broke at home, it would probably cost me £50 to have fixed, but an identical freezer at work would probably cost £500...It stinks, rip of bleeders!

Jayne

 

[multilingual]

Jayne, why don't you just take your freezer home and get it fixed there? :wink:


Back to the main topic:

As for making a profit, experience has taught me to make a profit on everything and not spend money on any area of the business that will not generate a positive return.

When I was in the Plant Hire business I used to buy all the latest machinery because that is what the customer demanded, yet a ten year old excavator would do exactly the same job as a new one.

The most profitable companies would often ask me to provide an older machine at a lower rate, simply because 'the machine doesn't make me any money, it's pulling the bloody building down that pays'.

In other words, he was getting paid to do a set job, and the end results were the same no matter what machine he was using.

The amount of contractors I saw set up in business with all the latest tackle and then disappear within 18 months was frightening.

Profit is key. So when looking at a project I always start at the top and work my profit into the costs. If there is not enough margin left to pay for the raw materials then I don't proceed. I don't compromise on profit unless there is another angle to the job. (ie using a loss leader as a front door to a bigger contract)

I also used to do things the same way as Claire, start out cheap to get a name and then increase prices later. That was a slow ticket to disaster for me (may be ok for you Claire ) because as soon as I started upping the prices the customers would go elsewhere. I realised that all I was attracting were penny pinchers and they have no loyalty.

Just a few thoughts.

JB

 

[Cornish Steve]

We measure everything we do against our mission statement and our core values. Yes, it's very important to make a profit; however, that's just one dimension of a business.

 

[Rob Holmes]

It's a good question especially for the Self employed.

It's an easy trap to get into when you're SE (just making enough cash to cover the month ahead).

What alot of self employed people don't think of is that if they do this they are not actually making a profit - they are breaking even - and businesses that only just break even are almost making a loss.

The other danger is to try and make too much profit because prices get ramped and business also drifts away to cheaper competition.

I guess a mature look at what you do, overheads, historic and projected emergencies, a bit for a bad quarter, what the competition is up to, the quality of your products and services etc etc all need to be taken into account when coming up with a price.

Then you have to sell this to the client as often they will assume a standard service from all people and purely look at price - hence they try and squeeze your profits - but when they do - try and decide which area of the business above (and you'll have others) you don't mind taking the cash from.

Rob

 

[sparklyscotty]

Interesting question... I am really enjoying reading peoples posts. I can totally agree this

I do get the feeling that I could do a lot more than I do. I get a lot of good ideas for things but they would take over my life for the forseeable future, and quality of life is more important to me than standard of living, if you see what I mean.
My other half says I could make a million if I could be bothered!

And since the main reason for running my own business is the freedom and quality of life it offers, and not to 'get rich', then I try to stick to that. However,

"I'm of the view that it's critical to be single minded about profit, but it's very easy not to be - especially during times of success. "

that is something that I am guilty of... a perfect example is when boutiques and art galleries ask to stock my jewellery collections on a SOR basis. It's not great for me to do it, but sometimes the ego boost of being seen in these places is just too much to resist.

I also have a hard time not knocking a price down for someone who obviously adores a piece of jewellery but can't afford it. I love designing it, and if it brings someone happiness, I would love to just hand it over for the price of their smile.

I am trying day by day to gain more of a balance between personal satisfaction and ability to pay my bills!

-Angel-