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Profit is Not the Purpose of Business

Profit is Note The PurposeMost people think that the purpose of a business is to make a profit. I don’t agree.

Profits are part of business, for sure—a very important part. But if profits are looked upon as the main reason for being in business, it’s unlikely there will be much in the way of earnings—at least not in the long haul.

I see profits in business being akin to eating in life. Eating is important to sustain life. But it’s not the PURPOSE of life. You can go without eating for awhile, but eventually you need to fuel your body or you won’t be around to fulfill your purpose.

In my own life and in my business, I’ve found that when I’m focused mostly on income or profits, they have tended to be much more elusive—sometimes nonexistent.

But when we focus on adding value, solving problems and truly serving our customers, the profits come almost automatically.

If you want to earn a lot of money, then find ways to add a lot of value.

Now, if you have a really flawed business model, you can provide good value and still not make a profit. You have to be smart about it.

And there have been times when I was so focused on my passion, my dream and my cause that I didn’t pay enough attention to generating sufficient profit to maintain the engine of business. There has to be a balance.

In these difficult financial times, it’s easy to lose focus and concentrate too much on financial performance. As we strive to survive, we can lose sight of providing the real value that brings in the business.

As customers become more careful in their buying decisions, it’s more important than ever for us to give them enough value for them to see it being greater than their seemingly limited finances.

I’ve seen way too many business owners blame their customers for not patronizing them like they have before. There’s almost a sense of entitlement.

It’s like the Scott Trade commercial about the stockbroker losing clients to the discount brokerage house. He has an expectation that they should continue to do business with him regardless of the changes in the market or his competition. Instead of looking for ways to add value to his services, he thinks business should simply be like it was.

No one owes you their business. You have to earn it every day.

You have to be aware. You have to innovate. You have to serve. Because they get to vote—and they vote with their feet.

And that’s why I think service and value is the purpose of business.

  1. September 6th, 2010 at 01:46 | #1

    Absolutely Michael.

    Why does a business formed in the first place if not to provide a product or service. You cannot hope to make a profit if you do not offer this.

    Remember too, that there are other businesses that don’t exist to make a profit. I often think that the distinction between for-profit businesses and the rest is an artificial distinction, because the latter have a moral obligation to be even more efficient because they are dealing with other people’s money – whether given voluntarily or involuntarily.

    To reinforce you point however, I worked for a financial services company in the early nineties where a new management team introduced the strategy of growing the business by 15% p.a. By the mid-nineties the company no longer existed – and that after ninety years of never previously having made a loss! I think that says it all!