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Profit

Profit is the pile of money that is left over after all the bills are paid and the costs are tallied. There are many different types of profit for accounting purposes (net profit, gross profit, EBITDA).

The ultimate goal of any company is to make a profit. It is not to serve customers. It is not to be good corporate citizens. It is not to create jobs and generate employee job satisfaction.

Those are all means to an end. They are all very important, and are great ways to make profit, but if those were the end goals, there are better ways to do each of them. (Non-profits, charitable work, volunteering, etc.)

Profit can be managed in the short term by a variety of decisions, most of which will hurt long term profitability at the expense of a raising the near-term profit number. For example, turning a quick profit is easy if you cut all R&D. But it sacrifices the company’s future. It is important for all the stakeholders to be aligned in setting profit goals, or they can end up at odds with each other.

Lean helps increase profit by both reducing costs, and improving sales. Many of the benefits of Lean make products easier to sell. Low lead time and high quality are obvious selling points. Lean also lowers inventory, making the decision to redesign a product less costly.

When it is done well, continuous improvement can increase job satisfaction, improving customer perceptions of the company. Time and again, research shows that happy employees make happy (and profitable) customers.

 

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