Home / Dollars & Sense  / What Is Profit… Really?

What Is Profit… Really?

“How’s business?”

It’s a common question among entrepreneur peers, and although women tend to stray away from the numbers conversation, the answer to that question is always rooted in some form of a monetary agenda.

Because after all, that’s what business is all about–creating and delivering value in exchange for monetary compensation.

When we hear people begin to talk numbers as it relates to their business, sales and revenue are the two terms that get thrown around, but neither of these figures can really tell you much about how the business is really doing.

The health of your business is rooted in its profitability.

Sure, profit is impacted by how many sales you make and how much revenue you bring in, but it also tells a story around how well you do at managing the costs of running your business, and that’s where most entrepreneurs get into trouble.

If you make $1 million in a year but spend just as much, your business is unhealthy, not profitable, and it’s time to rethink the way you’re running your company.

So profitability is simple, in theory, but most business owners don’t utilize the basic methods of budgeting and planning for expenses and profit that profitability begins to be more and more difficult to achieve.

Here’s a way to become instantly profitable in your business: Pay yourself first.

Just like the way you’ve been taught in personal finance, but this time make your business fund your profitability first.

It doesn’t have to be much, it just has to be something. Once you take the one to two percent of your next sale and fund your profitability, you reduce the amount of money you’re allowed to spend on the cost of running your business.

No one said we have to wait to be profitable–that’s just the way we always thought we were supposed to do business.

It’s time to flip the script on how you approach profitability and how you talk to your peers about the health of the business.

Next time you go to a dinner party and get the “How’s business?” question from your fellow entrepreneurs, let them know that you’re happily profitable by paying yourself first.

And then when they wonder how that’s possible, send them to sheBOOM, where I’ll be sharing my tips on how to get there!


About the Author:

Tess Wicks joins sheBOOM contributor team as a “Data Vixen.” Tess is a Profit Expert and Financial Consultant for small businesses owners and entrepreneurs. She’s got a knack for numbers, strategies, and processes but can never say no to a cup of over-priced coffee.Read more about her here.