You get what you focus on. In business, it means focusing on profit.

A business without profit will die.   Being passionate about your work may keep you in the game longer, but without profit you are still losing money. You have to keep business expenses in control. There isn’t a shortcut that allows you to succeed if don’t have a clear path to profitability for your company.    Every business may go through short cycles when expenses exceed income, but allowing it to happen repeatedly without making adjustments is the definition of insanity – doing the same thing over and over without making changes, expecting a different result.

The challenge in business is we often move our focus away from profit.  We spend all our energy concerned about the price we are selling our product or service for and what our expenses are.  Profit can become an afterthought – we forget about the significance of making a profit.

Shifting the focus to profit:

Expenses vs. Profit  by definition

Expense:  “The cost required for something; the money spent to obtain something.”

Profit:  “A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.”

Does the word “expense” evoke a positive or negative reaction for you?   What about the word, “profit”?   Which call to you want to take from your accountant?

“I am calling to talk about all your profit”  or “I am calling to talk about all your expenses.”   

Profit is healthy – profit means you are a valid business.  Expenses are important and need to be managed, but they will never be a positive.

In Mike Michalowicz’s book ‘Profit First’, he suggests businesses shift away from the traditional formula we have used to calculate how well our business is performing, by shifting the focus to profit…first.

Old Formula:        Sales – Expenses = Profit

New Formula:      Sales – Profit = Expenses

The new formula is mathematically the same, it has the same three components, but by subtracting the profit first it forces you to determine how much your business needs to earn in profit to be healthy and sustainable.    Does one of the formulas make you think more about adjustments in spending and/or selling price?

How much focus do you put on profit in your business?  Being passionate about your business does not guarantee success.   If you put more focus on profit by implementing the New Formula instead of the Old Formula, let me know how it changes your mindset and your profit!