10 Positive Points Profit Produces
It seems obvious that profit is desirable, maybe even virtuous. If society at large fails to understand the essential goodness of profit, certainly a capitalistic HVAC industry should acknowledge it. However, even within HVAC, an anti-capitalist undercurrent slips in from time to time, making it important to note the positive points of profit.
1. Profit ensures continuity — The first obligation of a business is to survive. Without profits, a business will eventually close. A closed business serves no one — customers, employees, suppliers, investors, or the community. Profit ensures continuity, which makes it possible to serve others.
2. Profit encourages efficiency — Profit is a measure of efficiency. It’s a measure of how cost effectively a business can deliver products and services. The need to be profitable forces a business to seek efficiency out of cost effectiveness. Compare a profit seeking enterprise like FedEx with the nonprofit post office or your average airline with Amtrak. Which enterprise seeks continuous improvement? Which seeks efficiency?
3. Profit improves service — By nature, profit maximizing businesses seek to acquire new customers and retain existing ones. To accomplish this, they search for ways to increase customer satisfaction. Without the profit motive, the customer satisfaction is an afterthought.
4. Profit gamifies business — Profit is a way of keeping score. It makes business fun. It gives people a measuring stick and goals to strive for. Removing profit is like removing the goal lines from a football game. You might as well give everyone a participation trophy and go home.
5. Profit provides accountability — A consistently profitable business is a well-run business. Profit is the essential summary number of business performance. Talk is cheap, but the bottom line is the bottom line. Without it, how can you judge performance? Without it, where is the accountability?
6. Profit encourages risk — Many start-up businesses are funded by outside investments. Investors are willing to gamble on entrepreneurs because the payoff from success is attractive. Without profits, there would be no return. Many of today’s most successful corporations would not exist without the injection of outside capital. Rewarding risk is an important purpose of profit.
7. Profit funds the government — America’s corporate taxes are among the highest in the world and need to come down for businesses to remain competitive on a global scale. Even at reduced levels, corporate taxes would still be an important source of revenue for the federal government, not to mention state governments. While not necessarily efficient, government does provide services valued by the public. In fact, a strong case can be made for taxing non-profits that are not charitable in nature, such as 501(c)6 organizations that compete with for-profit enterprises. Just because they are called nonprofits does not mean they lack profits. Profits are referred to as “surpluses” and can be retained. The 501(c)6 classification included the National Football League (NFL) up through 2015 when they voluntarily gave up their tax-exempt status due to bad press. Other lower profile organizations continue their 501(c)6 status.
8. Profit clarifies motives — All organizations have motives. There are the stated motives and the real motives. With a for-profit business, profit is always a motive. It’s a motive everyone can understand. But what if profit is not the motive? How can the real motive be identified?
9. Profit is a measure of value — Ultimately, the profit of a business reflects the value it creates for society. Create greater value, and profit will inevitably increase. Beyond societal value, profit is used to calculate enterprise value and create an exit strategy for business owners. Obviously, a more profitable business is worth more to a buyer than a less profitable business.
10. Profit is virtuous — In the Parable of the Talents, Christ used an analogy of profit to explain service to others. This suggests that Jesus, the most virtuous man who ever lived, was comfortable with and even approving of profitability. Christ called the profit generating servants “good and faithful.” He called the servant lacking profit, “evil and lazy.”
There you have it. Profit makes you good and faithful. Profit is virtuous.
Publication date: 12/18/2017