The only thing that matters in any business

You might think you’re in business because you want to produce the greatest bike in the world or offer the best steak in the world. But you’d be wrong. There is really only one thing that matters in any business and it is neither of those.

Ok. Let me say this one outright. If you are a commercial business then you exist for one thing and one thing only – to make a profit. That’s it.

Many will argue that “hey we want to do something good in the world, we want to bring quality clothes, gadgets, medicine, services” or whatever. But the reality is if you cannot turn a profit your business will die.

Others will say that businesses can help the environment, they can support charitable work etc. etc. Again, if they don’t turn a profit they won’t be able to do any of that. Even more people will tell you that large corporations need to add shareholder value, create jobs and so forth. And again I say, without turning a profit, you won’t be able to accomplish any of that.

So the primary high level goal, the ball, the target, the objective, the grand prize, the holy grail of a commercial business is to make a profit. To be more precise: to maximize the profit.

Notice that I say here “commercial” business. I am not talking about a non-profit, a charitable organization, a government entity or any other kind of organization. I am talking about a commercial business. Those other entities might have other goals like advancing a profession such as Chartered accounting, or protecting employees such as with trade unions, or delivering national programs like government agencies or even advancing world peace etc.

In this article I am only focusing on a commercial business. And for a commercial business there is only one goal – profit.

Some people will protest and say that a business is truly set up to provide the best bike in the world or the best steak in the world or whatever. However, I tell you, those are your products, they are merely vehicles to help you make money and turn a profit.

Some others will say that it is cynical or crass to think this way and argue that making a profit at the expense of the environment or world peace or health or anything else is wrong. Well, I tell you, please wait, those items are constraints that will impact and influence our options in formulating our strategy but they are not goals unto themselves. A business to be successful has to be mindful of the context within which it operates. A strategy has to maximize profits given the constraints and limits imposed by society, law, ethics, market forces, competition and so on.

So what does that mean? It means that any commercial business strategy must have maximization of profit as its ultimate goal. And with that in mind, any strategy that is not geared towards maximization of profit, will be a bad strategy that will erode profits, cripple the business and maybe wipe it out altogether. It may be profit this month or next year, or in a few years while you’re building up the business. But in the end you have to have that profit. If you keep operating at a loss you will crash and burn.

So look at profit as the main goal. It’s nice to have a simple singular goal to work towards. That will be your ultimate target, your bull’s eye. Everything you do from now on will have to be geared towards that one overarching, undisputed goal.

With profits you will be able to pay your employees, keep them employed and maybe employ some more, you will be able to pay your taxes, your creditors, your suppliers, pay dividends to your shareholders and afford to be a model corporate citizen, protecting the environment and donating to charities.

One overarching ultimate goal: Profit. Even better: maximum profit. The most profit you can get.

Keep that in mind. Don’t forget it.

 

Thanks for reading. Let me know what you think. Leave a comment.

Muneer

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