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What Is 'Profit'?

Profit means bringing in more money than you spend:

For a business to survive, it must eventually make profit. You can’t operate at loss forever.

Profits also provide a “cushion” to the business to deal with unexpected events.

Profits are important, but they don’t have to be only goal for starting a business. Exploring interests and helping others, for example, are also valid reasons to start a business.

Josh Kaufman Explains 'Profit'

It doesn’t matter if your business brings in $100,000,000 a year in revenue if you spend $100,000,001. Business is not about what you make—it’s about what you keep.

Profit is a very simple concept: it’s bringing in more money than you spend. In order for a business to continue to exist, the total revenue it collects must exceed the total expenses it accumulates at some point in the foreseeable future. If it doesn’t, it’ll cease to be a business—the operation will run out of resources and close, or become a project subsidized by the profits of another business. Nothing can operate at a loss forever.

Profit is important because it allows businesses to stay in operation. Without generating Profits, a business can’t compensate its owners, who may be investing considerable time, money, and energy into the operation. If the owners don’t find their investment worthwhile, they’ll simply close the business.

Profit also provides a “cushion” that allows the business to weather unexpected events. If a business is barely generating enough revenue to cover its expenses and those expenses suddenly rise, the business is in a great deal of trouble. The more profitable the business, the better it will be able to handle Uncertainty and Change, and the more options it has to respond to the unforeseeable.

Profit is a very important consideration, but it’s not the be-all and end-all of business. Some people believe that the purpose of a business is to maximize the amount of Profit generated, but that’s not the only reason businesses are created. For some people (like me), business is more of a creative endeavor—a way to explore what’s possible, help others, and support yourself at the same time. From this perspective, as long as you’re making enough Profit, your business will continue to be successful.

Questions About 'Profit'

• Is your business bringing in more than it’s spending?
• Is the primary purpose of your business maximizing profits, or do you have other priorities?

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"Remind people that profit is the difference between revenue and expense. This makes you look smart."

Scott Adams, cartoonist and creator of “Dilbert”

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Share this concept:

https://personalmba.com/profit/

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