What is the best time to measure your profit?

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Every business needs to make a profit, we already know that, but when should that profit be measured?

And as for many questions, the first response is “That depends”.

It depends upon why you are measuring the profit.

Ideally, and unless you can afford to run “loss leaders’, every transaction needs to deliver a fair profit. That is a sales price that makes it worthwhile for the business to sell it, and that makes it a good deal for the person or business buying it.

A successful business also needs a longer term perspective. There are bills that only need to be paid after a longer period – rent is maybe weekly or monthly, suppliers often provide monthly accounts, utilities might only need to be paid every quarter, and some memberships or licence fees are due on an annual basis.

So your measure of profit has to take into account a longer time frame than just a single transaction. Your sales price has to cover the cost of acquiring what you sold, plus a contribution to these other costs of doing business.

That’s all probably stuff you’ve heard before, but have you heard of behavior being a measure of profit? Before exploring that, let’s take a step back and agree on something: What you do today will build the world you live in in the future. Taking it easy will not provide you with a nice house and car. Managing your money, taking control of your finances will be more likely to do so.

The point is that behavior that your market disapproves of will eventually cause the business to fail. It may survive on past glory for a while, but it needs to truly serve the needs of the market or it will eventually fail when people stop coming in to buy, and that makes a big difference to your overall profit position.

Think of it this way: if you don’t truly serve your market they will go to someone who does.

What business issues do you think other business owners would be interested in? Let me know in the comments section.

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