• Great Companies

5 Reasons why Profits Should Not define a Company


Aug 22, 2017

In an age where firms are increasingly delving into previously uncharted waters, upon the surface, every business still continues to be birthed for the sake of achieving one, singular ambition - turning profitable.

But, of course, more substance exists to a business than what might seem like its primary goal to the layman, and here are 5 reasons to explain why the presence of profits neither moulds a firm's present trajectory, nor shape it's future.

Re-investment - Re-investment has, over the years, donned the garb of a shrewd financial tool for those willing to bide their time, even if they're, in fact, sitting upon a potent gold-mine.

Companies have innumerable times in the past displayed their unwillingness to actualize potential profits for the sake of re-investment and, thereby, facilitate the creation of a better product and service to couple it with.

Be it the myriad of re-investment options available to procure for public investment schemes such as mutual funds or the corporate behemoths with their eye on rapid expansion and capturing market share, the phenomenon remains the reason why firms in the 21st century might "choose" to be devoid of profits.

It's also re-investment that sheds light on the misguided perception most hold of the term "profit" itself, for it exists merely upon a balance sheet and it's marked absence from the same doesn't spell a revenue-generation disaster for the firm - just that it chooses to be prudent with the sum it turns over.

Philanthropy - Charity boils down simply to parting with one's resources and, as a by-product, only suited for those who have them.

20 of Fortune magazine's top 500 companies donated a combined 3.5 billion dollars in cash alone through the course of the year 2015, while the network of donations in the form of aid materials and the like remain entirely unaccounted for, meaning that the figure could be vastly above the mentioned one.

Humanitarian projects launched in the past decade have, more often than not, possessed corporate or financial backing to spur them forward and that the companies mentioned above are only a few of those today partnering on a regular basis with renowned aid organizations, most prominently Red Cross, has developed to become something of a norm.

Pricing - In theory, the price of a product often relies upon either the fluctuations witnessed in a particular market, or how easily the materials necessary to create it are procured, if the product in question is indeed a physical asset.

The recent imposition of the Goods and Services Tax (GST) brought forth a panoply of companies in it's lead-up that were able and willing to slash prices in half for products that would then fail to sell even in the near future due the greater price tag they would don as a result of having incurred the infant tax.