Here are a few ground rules. This information is gleaned from my experience and limited research. While readers and commenters may have questions and points that I'll attempt to answer in a timely manner, it is not a discussion forum (in the style of instant messaging) where you should expect immediate responses to every question/point. While I will attempt to keep all references generic, I ask that commenters/responders do the same. I have 9 years of business ownership experience (first as a sole-proprietor and the last 5 as a corporation which employs people). Prior to that experience I have 9 years in the corporate world where I rose from front-line employee to department manager and where I was responsible for operations and the hiring of operational employees.
So let's get to it.
Profit; businesses exist to make a profit. Pure and simple. Profit shouldn't be a dirty word. Profit offers the opportunity to expand business, offer additional benefits to employees, charitable contributions and guarding against future economic downturns (that require the use of cash reserves to maintain operations). Before any charitable contributions can be made, employee benefits can be purchased or expansions considered, a business must make a profit.
While some would say that employee benefits are a cost of doing business, tax deductible and the right thing to do, they aren't usually required (literally) for the business to produce its product or service and they are only the right thing to do if in so doing it doesn't bankrupt the business (thereby putting everyone out of work).
Tax deductibility is often mentioned by those wishing to part businesses from their money, as a benefit/reason to give up said money. What many of those people often don't get is that deductible or not, the business must first receive the revenue before it can be expensed. I.e. if a business has an annual net income of $50,000 it does no good to be able to deduct a health care benefit (as an example) of $60,000 since it would cause the business to incur a loss of $10,000.
The next time you catch yourself (or others) bemoaning the corporate world for concentrating on profits, consider your personal life. By that I mean we all think we don't get paid enough and we often don't have "enough" money left after paying the bills. We want profit in our personal lives and we often don't care what that means to the business. Oh I know, we are charitable in our giving (how many of us actually give the 10% the bible suggests?) and we "care" about others, but we still think we're owed a certain amount of profit. Well, businesses do care about its people and charities. Many CEO's will tell you they'd be nothing without a good workforce. Therefore, they are willing to pay competitive wages, offer whatever benefits they can and generally treat their people well. Also, many corporate executives and board members actively participate with different charities locally and nationally.
"Profit isn't so bad, but we all know that some businesses have profits that are ridiculously high." How many times have you heard a statement like this? Even if you buy into this philosophy, I ask how much profit is too much? What if an insurance company reports a $10billion profit this year. Do you think that's too much? What if next year that same insurance company has to pay out $12billion in damage claims because a hurricane caused that much damage? Would you still say the company's previous year $10billion profit was too much? If some government agency came along and limited an insurance company's profits to, say $5billion per year and then one year couldn't pay your damage claim because they didn't have the reserves because of the cap on profits, how would you like that?
Next posting will focus on jobs.
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