In this 12-week series, we share the changes, big and small, that you can make in your business to 1) increase and stabilize your profits, 2) see and manage your cash flow more proactively, and 3) slay the cash eating monster that stalks owners of small businesses.
First off … let’s talk about “profit.” Lately, that word has become charged within the business community. How you see profit, and how you proactively manage your profitability (or don’t) has an enormous effect on how you run your business.
Let’s get clear on what “profit” really is because once you do, your business can grow faster, better, and less stressfully, if you do one simple thing: put your profit . . . first.
Definition:
Profit = exchanging something you value less, for something you value more.
Consider Paul and Mary. Paul loves chocolate ice cream and dislikes vanilla. Mary loves vanilla and dislikes chocolate. They were each given their less favorite flavor. Paul got vanilla. Yuck!
As they are deciding whether or not to settle for something they didn’t want, or just throw away their cones, they bump into one another and discover their mutual dilemma. They decide to exchange cones. Paul and Mary each give up a thing of lesser value for a thing of higher value. Paul gives up the vanilla cone he didn’t really want, and gets his coveted chocolate cone! Both have experienced profit, and are in a better plan than they were before.
The negative stereotypes around profit grew out of some thinking that profit for one person or entity must come at the expense, or to the detriment of another. This is absolutely not the case. Profit should always be two-sided when it comes to business. Each entity should gain something of more value in exchange for something of lesser value. If this is not the case, there is an unequal power relationship, where the stronger party is basically taking from the weaker.
Unfortunately, some businesses try to negotiate deals at others’ expense, but running a business on one-sided profit is not only socially unjust, but it is also unsustainable, and probably creates a pretty lousy place to work. A well run, sustainable business looks for ways to make sure that each party profits, and the business gains something of more value than before in every exchange.
At CLARK.LAW it is in our best interest to make sure that our business owner clients are successful and continue to grow … profitably. As you grow, we are able to continue to support you with advice, legal protections, and business counsel on how to increase your profits, or the value you are getting from every business exchange, including the exchange you make when you work with us! Because we follow the equal exchange model for profit, when you profit from your business, our business profits as well.
Similarly, when you look at your business finances, we want to make sure that you are taking care of your profit. . . first. (The vast majority of businesses are not!)
Right now, you are likely using this tried true model to financially manage your business:
Revenue — Expenses = Profit
This is the way your bookkeeper (even if it is you) probably looks at the business, and this is how banks and investors value a business. It is a methodology that was designed for the past … not the future!
What this model says is that your profit is an afterthought. And since you are the ultimate beneficiary of profit … that makes you an afterthought of the business. We both know that it not why you started your business: to be an afterthought! You started a business to provide incredible value to others in exchange for something uniquely valuable that your business needs to grow. You started a business so that the business could provide you with the means to live your life according to your priorities.
What we’re going to be talking to you about throughout this series, is for you to re-envision your business, using a small, but enormously powerful tweak to the formula above. From now on … you should run your business to where:
Revenue – Profit = Expenses
The business eats after you!
Keep a lookout for the second piece of the series where we deep dive into what this model means and we’ll also explain:
Where your Profit is, and how you can be profitable tomorrow … and forever.
CLARK.LAW
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