The Australian Small Business Blog

Friday, January 22, 2016

The Purpose of Your Business

by Dr Greg Chapman

Most the business plans I see read like novels, and if they were in libraries, they would be classified as science fiction. At some time, most business have prepared a business plan. Often at the early stages, and are filled with the optimism of the inexperienced, but once exposed to the reality of the market place, these plans regularly get forgotten on the shelf gathering dust.

I point out, that none of these possibly worthy goals is the purpose of your business. It might be the reason you went into business, but not its purpose.

The purpose of your business is to make a profit. If it’s not, you are running a charity. Nothing wrong with charities, which are non-profit, or even loss making organisations, but that is not the purpose of a business.

Note that making a profit is not the same as making money. Your profit is what’s left over after covering all your costs and paying yourself a decent, market related wage. How much profit should you be making? I argue at least 10% of turnover to ensure you cover sales volatility which can easily turn a 5% profit into a loss. To learn more about small business best practice benchmarks for net profit, read this article on EBIT targets.

While profit may not be the reason you are in business, it is the result at being good at business. Think of your profit as a scorecard that demonstrates your reason to go into business was a good one.

May Your Business this Year be - As You Plan It.

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Dr Greg Chapman is the Director of Empower Business Solutions and is Australia's Lea ding Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.

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1 comment :

Knowledge Addict said...

I read your 5 pillars and believe your insight is right on. Thanks for sharing your knowledge. I need a mentor like you.


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Dr. Greg Chapman is also the author of
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The Five Pillars of Guaranteed Business Success




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