Are You Avoiding Profits? (April 2007)

Last Month, I discussed the definition of “profit”, defining the term as a return on capital and explaining that many times, small business owners don’t have a clear picture of their profitability as they tend to subsidize the business with below market labor, interest free loans, or otherwise don’t properly record all of the costs of running the business.

This month, I’d like to discuss what causes profit, or in some instances, the lack thereof!

Most under performing businesses that I see don’t suffer from a lack of market demand, intense competition, or other external factor. Most under performing businesses suffer from a lack of accountability within the organization. I believe that accountability causes profits and a lack of accountability can most assuredly cause a lack of profits!

While I grant you that it might not always be true that an accountable organization will be a profitable organization, I would argue that a lack of accountability will certainly cause a lack of profits (meaning that the organization will actually be losing money or could be making much more).

Just as Einstein discovered E=mc2, I have discovered that: A Lack of Accountability Will Cause a Lack of Profits! While I realize that a comparison to Einstein is a somewhat bold and outrageous statement, surely there is sufficient anecdotal evidence in most businesses to see what happens when people aren’t held accountable. Generally, everyone suffers -- employees, stockholders, suppliers and customers.

While some of those constituencies might feel as though they are held hostage to the lack of accountability, it’s rare that they don’t have the ability to go somewhere else! Employees can find another job, stockholders can sell their shares or choose not to invest more resources, suppliers can charge extra for the difficulty they have dealing with an unaccountable organization, and customers most certainly will choose to spend their money elsewhere! Given sufficient time, all of them will ultimately make another choice.

What causes this lack of accountability? Often it is a desire not to deal with conflict. I believe, however, that conflict (at least constructive conflict) is good. It causes people to clarify their beliefs, expectations, positions and views about how everyone in the organization fulfills their roles and responsibilities and how the organization serves customers.

If you’re avoiding the conflict that comes with accountability, then you’re avoiding profits!

Are you avoiding profits?

If you need help with your business, financial plans, or goal setting, please give me a call at (314) 863-6637 or send an email to And, remember . . . Your Cash Is Flowing. Know Where.

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