by Michael Watkins, MBA/JD, EBITDA Growth Systems
prof·it: a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.
This is a definition right out of a dictionary. From our vantage point, profit is so much more – it is the reward that one should expect for taking on an entrepreneurial risk. The business owner should expect to generate a profit each and every month; otherwise, the enormous risk associated with spending money on labor, materials, tooling, 3rd party processes and overhead is simply not worth it.
It is amazing how cavalier many small to medium-sized machine shop owners are about profits. There is a much greater emphasis on revenues even though a wise man once said “you can’t buy groceries with revenues” – you need profits. It is as if they are unaware of the risk/reward relationship that should define the entrepreneurial pursuit. Profit is the oxygen that you breath at every stage of the business lifecycle; whether it is the startup/growth phase, the sustain phase or the exit phase.
val·ue: the regard that something is held to deserve; the importance, worth, or usefulness of something.
This definition implies that beyond profits there is value. Profits come in the form of money. Value comes in many forms. In fact, it is the business owner to determines what values looks like for their company, their families and their employees. If profits is the oxygen to sustain the business, then values are the reason for having the business at all.
People come to the United States from all over the world to chase the American dream. The American dream of fame and fortune is believed to be achieved through sacrifice, risk-taking, and hard work, rather than by chance. So, let’s focus on profits in the pursuit of our own American dreams.