What Is Profit?

The next time someone tells you that they have to make a reasonable profit, begin the discovery process to learn their definition of the word Profit.

Do not assume that their definition of profit is the same as yours.

• In a volume dependent manufacturing business profit might mean keeping the production lines running at full capacity 20 or 24 hours a day. A higher volume passed over the same fixed costs will make all of the business more profitable. Your volume may make your partner’s business more profitable overall.
• Profit might be in helping a commissioned salesperson achieve his/her quota for this reporting period. There were times in my marketing career when I would reduce the price a little for the sole purpose of helping a salesperson achieve quota. That was a profit in morale.
• Profit might be defined as boxing the competition out of a big order. I know company presidents who will "steal" an order from the competition just to win a contest. Is there such a thing as profit in ego?
• Those selling organizations which consider market share a primary target will take a lower profit to enhance their market penetration.
• Reducing a price to entice a first-time customer to try a new product or service is no more corrupt than your grocery store offering "loss-leaders" to get you into the store.
• Lowering the price on a unit of capital equipment in order to create an after-market for spare parts, service parts and consumable items is no different than Gillette offering us a low- price razor handle to insure a high volume on their most profitable item --- the blades. Think about the price of Hewlett-Packard printers in relation to the price of the replacement cartridges.

What is profit? Before your next big negotiation, discover how your other party defines profit, then help them succeed by doing business with you.

Jim Sauerwein