The Origin Of Profits and How to Get There : Under30CEO The Origin Of Profits and How to Get There : Under30CEO
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The Origin Of Profits and How to Get There

| April 8, 2011 | 3 Comments

business profits

After all is said and done, profit is essential to a business’ survival as air is essential to life. But how does one make profits? Or put another way, where the heck does profit come from?

Proffering an answer to these questions is the essence of this unusual article. This article has been overdue, I’m glad I finally wrote it, thanks to Sonia Simone’s article about Profitable Idealism that sparked up the inspiration. I know a lot of you have been wanting to cut the chase and get to the bottom of how one can still be profitable as a business by being SIGNIFICANT [different and making a difference].

Q: What Is The Origin Of Profits?

I have always believed that there’s more to profits than just chasing money. Dr. Stephen R. Covey helped clarify my thoughts when he came up with a perfect analogy in his classic book, ‘The 7 Habits of highly effective people’. He talked about goose and the golden eggs. I am building up on his analogy by relating the underlying principle to business.

Imagine you are a poultry farmer and you wanted to sell more eggs. What would you focus on? Selling more eggs or feeding the hen that lay the eggs?

Imagine you are a fisherman and you wanted to sell more fish. What would you focus on; selling more fish or catching more fish?

Imagine you are a dairy farmer and you wanted to sell more milk. What would you focus on? Selling more milk or feeding the cows?

I could go on and on, but by now I am sure you perfectly understand the point I am trying to make. However, I will like to add a last one; I use this often when I speak in seminars because it’s funny and perfectly drives home the point.

If you were married and you wanted to have babies as a couple, what would you focus on? Having babies or making love?

The point is very simple but very uncommon in practice. As with most simple things, they are seldom practiced. I think its basic human nature to always focus on the outcome rather than on the input and process. We shy away from the work and focus on the result. As much as I would love to see results, I have always cautioned myself with the above analogies.

A: VALUE

Relating this analogy to business is what answers the question; what is the origin of profits? While it is so much easier to go ahead chasing profits, it is much wiser to ask yourself where profit comes from or how profit is made. I have heard it over and over again from several entrepreneurs this phrase;

“I’m looking for a business that can make me some good money.”

I wish they existed.

The truth is that there is no business that doesn’t have the potential to make you some good money. It’s all a matter of what you focus on as an entrepreneur. Going back to the analogies above, there’s  no hen that is not potentially capable of laying eggs; there’s no cow that is not potentially capable of producing milk, there’s no fisherman that is not potentially capable of catching fishes and also there’s no man and woman that is not potentially capable of making babies. The key word in all these analogies is potential.

If as a poultry farmer, your focus is more on selling eggs than feeding the hens that lay the egg, then you are killing the hens’ potentials of laying eggs. Sooner or later, rather than selling eggs, you will start making chicken barbeques as a result of several dead hens. Why? The moment you shift focus to selling eggs rather than feeding the hens that will eventually lay the eggs; you’ve given up the opportunity to sell more eggs. Hens don’t lay eggs because you’re ambitious about selling eggs, they lay eggs because they have been created to lay eggs if they are properly fed. So your responsibility as a poultry farmer who wants to sell eggs is to properly feed the hens. Fulfilling your own responsibilities of feeding them empowers the hens to lay more eggs that you can eventually sell.

Business is no different.

Making money in business is a question of potential. The ideal question instead of asking what business can make you some good money is this;

“How can I create a business that has the potentials to make me some good money?”

The moment you replace the word “looking” with the word “create”, the picture about the origin of profits becomes much clearer.

Businesses that make good money are not FOUND, they are CREATED!

It is your responsibility as an entrepreneur to create a business that can make you some good money by coming up with something potential to offer. Without that input of potential in your business, there is no way you are ever going to make a dime.

The potentials of your business to make some good money depend on how much value you offer to the public. Value is what makes your business potentially capable of making profits. In essence, value is the origin of profits. Until you can create something of value, your desire to make profits from business is not only impossible, it is universally illegal.

Here’s why.

When  you are trying to make money from business that is not offering and delivering value, what you are doing is called ripping people off and that my friend, is a criminal offence.

If as an entrepreneur, your focus is more about making profits than creating value, then you are limiting your business’ potential of being profitable.

What then is Value?

Value is simply anything that has the potential of making a positive impact on another human being.

I have decided to use this definition to clear the cluster and help you focus on what really matters. All the definitions of value are summarized in that sentence. The whole essence of value is to make a difference in the life of the recipient finish. This is where the popular marketing phrase of “sell benefits and not features” originated from.

People pay for solutions to their problems and until your business is potentially capable of proffering solutions to people’s problems as a result of the value in your products/services, forget about making profits. In fact, you are not qualified to make profits just as it is not possible to get without giving. Focusing on making profits without creating value is the definition of stealing.

How to be profitable without stealing

  1. Definition of VALUE: The first step to making profits without stealing is to sit down and define what you want to call value in your business. Every business cannot provide the same kind of value, so it’s highly important you define your own kind of value because this is what separates your business from all others who are in similar industries or providing similar products or services. So what kind of value do you want your business to provide? In other words, what kind of value do you want your business to be adding to its target customers? Your first task as an entrepreneur is to identify and define the value your business is offering or bringing to the world.
  2. Creation of VALUE: the second step in making profits without stealing after identifying the kind of value your business wants to offer the world is to ask yourself; how do we create this value? Definition of value is knowing what to focus on as a business, creation of value is the actual product or service you want to offer to your target market. That you have identified your company’s definition of value doesn’t mean your company currently possesses or provides that value. After all, you cannot possibly give what you do not have. So the second step is creating your own version of value that you want to offer the world in exchange for money.
  3. Communication of VALUE: no one will ever know that your business has identified and created something of value to the world if it never comes out to proclaim such a thing exists. There are a million and one people in the world who are in need of the kind of value your business has identified and created, it is the responsibility of your business to make the existence of such value known to the world. This is the place of communication. You have to announce the existence of your company’s unique kind of value so that those in need of it can come for it while giving you money in exchange for the help your business provided.
  4. Delivery of VALUE: the final step in making profits without stealing is the actual delivery of the value you have identified, created and communicated to the world that your business offers. In delivering the value you want to be sure that it is exactly as you have communicated. You certainly don’t want to over promise and under-deliver. So make sure you deliver on the same quality and quantity of value you have previously communicated. Doing this makes your business indispensable in the eyes of those you serve.

So over to you my dear reader, how has your business been able to define, create, communicate and deliver value to the world?

Tito Philips, Jnr. is an unusual Nigerian that is passionate about helping people, businesses and lives become SIGNIFICANT [different and making a difference]. He’s the CEO of MADphilips and the publisher of naijapreneur! a business development blog. Connect on twitter @MADphilips

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Category: Startup Advice