THE PURPOSE OF PROFIT
"Profit is the ultimate test of business
Profit serves three purposes. One is it measures the
net effectiveness and soundness of a business's efforts. Another is the
"risk premium" that covers the cost of staying in business-
replacement, obsolescence, market risk and uncertainty. Seen from this
point of view, there is no such thing as "profit"; there are
only "cost of being in business" and "cost of staying in
business". And the task of a business is to provide adequately for
these cost of staying in business by earning adequate profit. Finally,
profit ensures the supply of future capital for innovation and
expansion, either directly, by providing the means of self-financing out
of retained earnings, or indirectly, through providing sufficient
inducement for new outside capital in the form in which it is best
suited to the enterprise's objectives.
Beside to pull the plug on an unprofitable business if it is not
covering the cost required to stay in business or providing enough
capital for future growth.
THE PRACTICE OF MANGEMENT
The purpose of a business
"A business enterprise has two basic functions:
Marketing and innovation."
If we want to know what a business is, we have to
start with its purpose. And the purpose must lie outside the business
itself. In fact, it must lie in society, since a business enterprise is
an organ of society. There is only one valid definition of business
purpose: To create a customer. The customer is the foundation of a
business and keeps it in existence. He alone gives employment. And it is
to supply the customer that society entrusts wealth producing resources
to the business enterprise.
Because it is a purpose to create a customer, any
business enterprise has two - and only two- basic functions: Marketing
and innovation. These are the entrepreneurial functions. Marketing is
the distinguishing, the unique function of Business.
ACTION POINT: Find out what needs your customer's
want fulfilled today. Determine how well your products are meeting the
needs of your customers.
THE PRACTICE OF MANAGEMENT
"I do not mind lying, but I hate
SAMUEL BUTLER(1835-1902), British scholar, Translator
"I don't want to achieve immortality through my
work. I want to achieve it by not dying."
WOODY ALLEN, American screenwriter, film producer and
"Ambition can be an overwhelming drive that can
send you insane. I have a philosophy-good things come to those who wait
and work hard."
LIZ DAVENPORT, Australian fashion designer.
"Everybody knows good counsel except him that
have need of it."
"He who waits to every man's advice will have a
"I'm aware of the risks involved with change.
But this is a business, not a monument. We have a responsibility to our
ROBYN AHERN, Australian businesswoman and CEO of
Aherns department store chain.
"Its amazing how many people beat you at golf
now that you are no longer president."
GEORGE BUSH Sr., American statesman, and 41st
President of the USA.(1989-1993)
"Money, like dung, does no good till 'tis
THOMAS FULLER M.D. (1654-1734), British physician and
"A bank is place that will lend you money if you
can prove that you don't need it."
BOB HOPE, American comedian and actor.