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Don't Count Others Profits

Small Business Help Tip 4

Don't count other peoples profits.

If you count up other people's profits (especially your client profits) it will probably upset you and almost certainly upset them.

For example, a baker planning her future business did all the preparation work involved in starting a small bakery business. She wrote up a business plan with all the expected costs on it. This included the cost of raw materials, equipment, premises, staff wages, insurances, debt servicing, promotional budget etc.

Having worked all this out she was in a good position to judge how much she would have to sell her products for in order to make enough profit to make the whole enterprise worth doing.

At this point volume came into the equation.

If she planned to sell her own product directly to the customer, then she would need more expensive 'high street' premises. She would probably need to sell a great variety of products to attract her customers and so consequently the unit cost of each product would be higher due to the low volume of each.

Alternatively she could concentrate on selling just a few products to a major retail outlet in much higher quantities. Her unit costs will then go right down and she could operate from much cheaper premises probably resulting in more overall profit.

This example from one of the small business team colleagues nearly ended in disaster because at this point the baker started to add up the major retail outlet's profits.

When she saw the expected profit which they would make on her products after all her risk and hard work she was so upset that she nearly pulled out. Luckily she talked about it and was reminded of the rule 'Don't count others profits'.

She had a perfectly good small business idea which was well worked out, and she eventually went on to make a good living out of it, but she nearly gave up because of the natural tendency to consider how 'fair' the whole system is.

We simply pointed out that the farmer who grows the grain, the miller who grinds it, the baker, retailer and various transport companies from the farm to the customer, all have their own job to do and their own profit margins to consider.

The important words in that last sentence are 'their own'. Life is complicated enough as it is without worrying about other people's profits and losses. Concentrate on making the best of your small business and let them concentrate on their own.

That way everyone will succeed.



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