When you start learning about business, you’re going to hear all manner of advice about what you are supposed to do. You’ll hear a bunch of terms like loss-leading, native marketing, and keywords and PPC advertising. And these terms are part of the complicated business that is business.
But there is something even more integral. Integral to marketing, and managing, and inventory, and to all aspects of selling.
And though it’s obvious, and something we’ve talked about here before, I thought that an entire article on the topic was necessary and needed.
Because it’s very easy to get lost in the weeds of this or that marketing trick, some new shiny method of advertising to your customers, and forget the most important aspect of economics:
Your company is not working well if it is spending more than it is making.
It is a failure if the cost outweighs the profit.
This one fact should be the cornerstone of any business endeavor, followed by an assessment of time and effort. Because if you are spending an hour to make a one-dollar profit, then I don’t care how enjoyable or challenging the business is, it is not viable long term as a business.
Now, there are logical counterpoints to this assertion, of course. Some businesses, yes, do take a little while to get going, and they do not make money until they have a presence. There’s a level of risk and faith in any business endeavor.
Further, there are business models that plan for insolvency and recoup the loss in one rush. That’s the supposed idea behind Black Friday.
But the point is that they do make money.
They make a profit.
So, the point is this: if you haven’t taken a look at all you are doing, if you haven’t done necessary and honest bookkeeping, then you are in danger.
Profit is important.
You can’t fight economics, no matter how smart you are. More money in than out, eventually, period.