Sunday, April 16, 2017

Profitability & Profits - Know The Difference

We often confuse profitability with profits. After all, the the dictionary defines profitability as 'the degree to which a business or activity yields a profit or financial gain'. But when you look closer at the multiple definitions of profit, and discover that one is 'the underlying or ultimate outcome or criterion', the realization hits you: Profits include, but are not limited to, dollars and cents.

Regardless of one's perspective, or chosen definition of profitability or profits, expenses play a critical role in the mathematics of both. Expenses must receive prominent consideration in any discussion of profits because they directly impact "the bottom line" - both professionally and personally.

We often associate the bottom line with business, but personally, we frequently ignore our own bottom lines, at least, or fail to establish them, at most. In business, the bottom line means the final total of an account. Personally, we have to accurately assess our work situations by using our values as a barometer to measure how profitable it really is, or can be.

Profitability, in this instance is the personal bottom line - the benefits that one's work has to offer in terms of positive impact on one's career/lifestyle/health/family.

These are measured against the expenses that negatively impact one's bottom line, in this instance, anything that makes work personally unfulfilling (e.g., high stress, long hours, long commutes, low pay, lack of appreciation, annoying co-workers, and any amount of unnecessary bullshit that you are forced deal with will top this list).

While the bottom line of companies is often profits (non-profits excluded), employees (their greatest assets) are seeking profitability. This puts them at odds with employers and makes personal values and company culture central issues in their quest for (greater) profitability. When companies empower employees (instead of merely employing them) they are happier and more productive, and inevitably generate more profits as a result.