Business Tips: Profit is Sanity

Many business people love to talk about turnover.

Companies will advertise that they are a $1,000,000 a year business (or more!)

British Airways

However turnover is one thing but what about profit? There are many companies that are currently international leaders in their field when it comes to turnover but are actually making huge losses. An example of this would be British Airways that according to reports in May this year had lost £531 million pounds. This company has a huge turnover and is a major world airline but how long can they trade losing such vast amount s of money?

When you look at your business accounts are you aware of the amount of money you are making? Profit is not just the selling price of the goods minus the cost of the them. Other costs have to be factored in. Advertising, premises, equipment, wages, insurance, utilities and the list goes on and on.

It is therefore essential that a business knows the true cost of sales so that it charges sufficiently to make a real profit. There is a saying that is well worth memorising. “Turnover is Vanity – Profit is Sanity!”

Log this saying into your mind because no business can continue for long if it is losing money. You need to make a profit! Profit is sanity and it is insane to think otherwise from a business perspective.

Roland Millward

The Entrepreneur Club

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9 thoughts on “Business Tips: Profit is Sanity

  1. This is a great article Roland.

    I come across so many businesses who don’t take into account their full costs when deciding on their own fee structure. It’s really important to get an angle on what your spend is and then apply a profit margin to it.

    If anyone wants any advice on this topic just give me a shout!

  2. As Phil said, if you think of incoming money as your/the business’s money then you could in theory make a loss! Profit is very important in business (though of course… big profits does not mean big success).

  3. Turnover is Vanity – Profit is Sanity, lol – this is so true.

    One of the issues I experience most with my clients is they are often unsure where and how to spend their money, and so they just do it haphazardly. For example, they may be running an advert in the newspaper and have no idea how well (or otherwise) it is doing – this is suicide.

    Even making sure that clients of their pay their invoices on time can help, but in my experience business owners are often too busy working IN their business, as opposed to ON their business.

  4. Great article Roland.

    I think too many company directors spend too much time working IN the business and not ON the business, as Simon commented.

    I see it all the time in my dealings with estate agency businesses. That industry is so expensive to run nowadays. There certainly aren’t the profits in it that there used to be. Directors spend too much time being REACTIVE instead of PROACTIVE with their business dealings, and often don’t realise that the business is losing money, until it is too late.

    Cash is king – Keep your eye on that!

    Eric

  5. You need to juggle three balls to be a success in business –
    The ‘Finance’ ball
    The ‘Marketing’ ball
    The ‘Operations’ ball

    If you keep your eyes on these, and keep them in the air, the business will look after itself ‘cash-wise’!

  6. Best get practising my juggling in that case… I’ve heard the key is to juggle stood on the edge of a cliff, so you can’t walk forward! Or you could try a wall to practice against 😉

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