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. 17