What are company profits?
Why are they important?
Profits are a very important concept for any business.
Profit is also an important signal to other providers of finance to a business.
Banks, suppliers and other lenders are more likely to provide finance to a business that can demonstrate that it makes a profit (or is very likely to do so in the near future) and that it can pay debts as they fall due.
What Are the Benefits of Making a Profit?
The success of any business depends on its ability to continually earn profits.
Earning a profit is important to a business because profitability impacts whether a company can secure financing from a bank, attract investors to fund its operations and grow its business.
Companies cannot remain in business without turning a profit.
Without profit, no business can survive.
A Business cannot survive for a long time if it is not earning sufficient profit.
Making a profit is essential for a business that desires to expand its operations.
Earning a profit allows you to open other business locations, acquire another business, target other markets and expand your operations into foreign territory.
Ability to Borrow Money
Many businesses depend on debt financing to operate. Debt financing obligates a business to repay the money borrowed to the creditor with interest.
A company’s profitability plays an important role in whether a bank lends the company money.
A company that earns continual profits is seen as a potentially good investment option because the investor believes there is a good chance to earn an attractive return on his investment.
Attracting investors depends on your ability to show the monetary benefits of investing in your business.
Real Bottom Line
Any potential buyer is going to want to see proof that they will also be able to have a comfortable life.
This means seeing just how profitable your business has been.
If your profits are not where you think they should be, then we need to talk.