5 Reasons You Need Your Enterprise to Be Profitable

Ever since I was a teenager, I have been a bit of an entrepreneur. I cut lawns. Washed cars. Sold fireworks. Sold Christmas trees. Managed football pools in high school (don’t ask). I found it energizing to create an idea and see that idea come to fruition. Especially when it was profitable.

You can look throughout history and find that economic systems such as socialism and communism have a track record of failing the people and providing extreme rewards for a select few elite who somehow seem to bypass the idea of “common ownership and shared wealth.” Profitability is not inherently bad. It is just the opposite; it is essential. Even nonprofit organizations do better when they have an excess at the end of the year to further expand their social or spiritual impact.

Here are the top five reasons you should strive for a profitable enterprise. And while a new boat may be fun, it does not make the list.

1. Profitability provides the capital needed for future growth and innovation.

It is common for a business or nonprofit to borrow money to fund a new initiative, a new product, or a capital expansion. But, some owners utilize some or all of their profits to reinvest back into the business. In other words, they become their own bank and pay themselves rather than pay interest to a lender. While this is not always possible, it is a noble goal to pursue and can only be done when you are profitable.

2. Profitability provides the opportunity to reward your employees.

I was recently talking with a few business owners of profitable enterprises who were sharing wise and creative ways to honor the employees who helped make their businesses a success. Some do this through bonuses. Others use profit sharing or phantom stock. Others move their business to partial or full employee ownership. And there are still other ways that profits can be used to reward employees, including increased 401 (k) contributions, providing counseling and chaplaincy services, and creating a benevolence fund for employees facing a crisis.

3. Profitability provides the opportunity to invest in and impact your community.

While some business owners have little vision beyond pursuing their own pleasure, the far majority we have met in our consulting and coaching view the wealth they have worked for as a blessing. They see it as a gift that they want to manage wisely and steward well for the greater good. We have seen firsthand how successful business owners have used their profits to impact their surrounding community as well as the world. From investing in the development of young leaders, to providing legal services to those who cannot afford them, to helping children receive life-changing surgeries in Africa, to helping their church expand its outreach. The impact is both visible and transformative. In the Bible, Proverbs 11:25 says, “A generous person will prosper; whoever refreshes others will be refreshed.”

4. Profitability provides you with the resources to prepare for a cold, hard “winter.”

I have a large extended family of squirrels that roam my yard. Sometimes Nala the cat and I  will watch out the window as these nervous gray creatures continue to gather nuts and bury them throughout my yard and landscape beds. Dozens of holes with a nut or an acorn in each one. They scatter them in multiple locations to make sure they have the food they need in winter, when their food supply shrinks and the threat to survival increases. Wise business leaders do the same. They store up some of their profits for times of crisis and lean months caused by unexpected economic events like pandemics, stock market crashes, and reduced liquidity of available funding.

5. Profitability provides the opportunity to bless your family and friends.

Profits not only benefit employees, business growth, and the larger society, but they are often also used to bless the family of the owner. Owners take great risks and make enormous sacrifices in order to build their business. It is good that they can now bless their family and friends as a result of the sacrifices they made early on. Whether it is helping with college, getting their first house, or creating memorable moments on a special vacation, it is often the profitably that makes such opportunities possible. Wise owners balance giving in a way that does not ruin their children, and they ensure that they do not remove the incentive for their children to work hard themselves.

Contact us to learn about how our experienced consultants can assist you in increasing the profitability of your business or organization.

Jay Desko is the President & CEO of The Center Consulting Group and brings experience in the areas of organizational assessment, leadership coaching, decision-making, and strategic questioning. Jay’s degrees include an M.Ed. in Instructional Systems Design from Pennsylvania State University and a Ph.D. in Organizational Behavior and Leadership from The Union Institute.