Risk & Business Magazine General Insurance Services - Fall 2020 | Page 17

PROFIT
Let’s talk about profit.
Really Mike, now? Is this the
time to discuss profit?
Definitely.
Why should we talk about profit?
Because in light of the coronavirus
pandemic, some business owners are
burning through cash to run “business
as usual.” As COVID-19 cases increase,
you worry whether or not your business
can sustain a recession that will be
triggered by this pandemic. You want
to have profit during the coronavirus
crisis because you want to have a solid
foundation in your business now. It’s
also necessary to have a solid foundation
when the pandemic is over so your
business will be better positioned for
success.
First to note, we are all in this together.
Second, I am working tirelessly to
provide as many resources and as much
guidance as possible in order to extend
a hand to you in service. One of these
resources, unbeknownst to me while
writing it, is my next book. Fix This Next
was released on April 28th (what timing,
right?). I wrote the book over the course
of five years, during which I never could
have imagined we would be facing the
challenges we are facing today. I am,
however, grateful that I did write it and
within it created The Business Hierarchy
of Needs (The BHN). The BHN is the
compass to help you determine the
vital needs of your business and the
diagnostic tool for fixing the need you
should focus on first. Knowing where to
start can be pretty daunting these days.
Enter Profit, the second of the base
levels in The BHN. Profit is the creation
of sustainability. Now, it is commonly
misunderstood that profit means making
money, when in reality, it means taking
money. Profit is the reserve you can use
in any way you require, and it won’t hurt
your business.
WITHOUT PROFIT,
YOUR COMPANY
WILL CONSTANTLY BE
TEETERING ON THE
EDGE OF GOING UNDER.
WHEN YOU MASTER
THE PROFIT LEVEL, YOU
BRING FISCAL HEALTH
TO YOUR COMPANY.
There are a lot of ways we can discuss
profit, but let’s apply it to the current
situation. For your business to survive a
crisis, it must be able to retain cash. In
times of crisis, many businesses revert to
sales when in reality they should focus
on creating profit, because profit is what
insulates your business during these
times of a crisis. That retention of cash
gives you a runway. Depleting the funds
from your profit account is not running
business as usual. It simply gives you
time to look at the data significance. Ask
yourself, Do you have enough data to
point out that you are having an actual
problem and you need to take action? Or,
is your business running as it normally
would?
The thing is, if you don’t see money
coming in, you react without having
data significance, and it’s not a good
move. It is best to use your cash reserve
to get through the crisis you are facing—
usually a period of two to four weeks
is enough for most businesses. In that
time you can determine from your data
if there are trends, if your business is at
risk, and if you need to take action and
revisit your costs.
In Fix This Next I explain that a common
occurrence is that business owners often
have a profit problem but are focused on
sales. Remember, it’s more important to
bake profit into every transaction you
have.
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