How Profitable is Your Business?

If you own or manage a business you know how important it is to have a healthy profit margin on your product or service. It is also important to control expenses. A well-managed business only nets about 7% of revenues as profit. Higher operating or material costs quickly erode the 7% to zero or into the red. But there is a third dimension of profit that most business owners and managers don’t focus on.

Suppose your well-managed business has revenues of $1M annually and payroll costs are at 25% of revenues ($250K). Provided that costs are under control you should net $70K annually. Now suppose staff productivity is 25% below optimum because they are untrained and poorly motivated. You will need 25% more people to get the work done, raising your costs by ($250K X .25) $62,500. Instead of $70K net it is now only $7,500. Which brings us to the real job of management – how we handle people. A recent scientific study shows that productivity correlates directly with how well bosses meet their employees’ needs. Owners and managers all have a ‘blind spot’ – the inability to treat employees’ needs equally with their own. That level of concern and sacrifice is uncharacteristic of most owners and managers. And net profit suffers for it. Our Lord spoke about giving more than we are normally inclined to.

In the Gospel of Luke, Chapter 6, verse 38 Jesus said, “Give and it shall be given to you, pressed down, shaken together and running over shall men pour into your lap. For the measure you use in giving to others is the measure others will use in giving back to you.”
The key to higher net profit is caring more about the people God has given us. The same study shows that two management behaviors guarantee higher productivity : Leadership and Nurturing. Where are we headed and what support does our staff need along the way? Being certain about those answers and acting on them puts a lot more in our own pockets. Then we can give even more to others and to God.

Joe Cox
[email protected]
Membership Director KofC Council 12240 at St. Bonaventure Catholic Church

Koc12240.org

Advertisements