Are Your Profits ‘Good’ or ‘Bad’?

A new year has begun, and hopefully the marketplace will return to normal soon. So let’s review our company earnings. Are the profits ‘good’ or ‘bad’?

There is a distinction between good and bad profits which many of us likely don’t think about but they are related to how we treat our customers. Bad profits can be defined as ‘profits earned at the expense of customer relationships. That is to say, whenever a customer feels misled, mistreated, ignored, or coerced, profits from that customer are bad. Unfair or misleading pricing can create bad profits. Some companies also contribute to the issue and shortchange customers by giving them a lousy experience. Bad profits extract value from customers, and do not create value.

We can expand this definition further. Bad profits may also earned at the expense of a company’s employees. They are profits earned by underpaying or mistreating employees, or by exposing them to danger. Bad profits may also be earned at the expense of the community. Take companies who pollute the air or dodge taxes as an example.

Defining good profits is equally useful and expandable. Good profits on the other hand, can be earned with customers’ enthusiastic cooperation. A company earns good profits when its customers are so happy and satisfied that they willingly come back for more. Furthermore, they tell their friends and colleagues to do business with the company also. The right goal for a company is to build relationships of such high quality that those relationships create promoters, generate good profits, and fuel growth.

But let’s expand this definition a bit. Bad profits are also profits earned at the expense of a company’s employees. Bad profits are also earned by underpaying or mistreating the people who work for you, or by exposing them to danger. Bad profits can also be earned at the expense of the local community, for instance by polluting the air or by figuring out some barely legal tax dodge.

From the perspective of an employee, good profits are those that fund good working conditions, living wages, decent benefits, and an opportunity to share in the wealth. Good profits help ensure job security and open up new opportunities for learning. From the community’s point of view, good profits allow a company to pay its taxes, maintain its property, and ovaerall act as a good corporate citizen.

Creating and sustaining good profits depends on a few things. One is having a high ethical standard. That isn’t so difficult, if your company is committed to working openly with your community. Transparency always and everywhere is key.

You will also need to look to the long-term health of the company and not just the next quarter’s profits. Companies that don’t manage to earn healthy profits over the long term normally don’t stay in business.

Treating employees and customers like partners also helps sustains good profits. If you treat employees like partners, it helps them learn and understand the economics of the business. Employees then have a chance to share in the wealth, and they thus have a stake in the company’s success. Customers who are treated like partners are invited into the conversation and asked what they value. When a company practices these steps then growing profits becomes a collaborative effort.

Partnership is more than just a way of running a company. If you can extend partnerships, you will be helping to create profits that include rather than exclude people and partnership generates wealth for everybody. Hired hands can be turned into businesspeople and customers turned into allies. However, it does require something that is too often in short supply in business: a willingness to listen to each other and to work together.

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