Why is being profitable so hard?

It’s easy to come up with an idea. It’s easy to start a business. It’s hard to be profitable. Profit is a funny thing because it doesn’t really show up anywhere and often times don’t know you don’t have any until its too late. For any entrepreneur running a business that is less than five years old you may find profit an illusive or deceptive concept. Profit is ultimately the amount of money your business has left over after it has paid for all of its costs. However paying bills this week and collecting money from customers next week while purchasing inventory today and paying employees tomorrow can make for a variety of movements in your cash flow that can make it difficult to understand if your business is profitable.

Speaking of profit, Uber, the ride-hailing company, hopes to begin finding profit soon. After raising enormous amounts of capital to buy it’s marketshare to become one of the dominant ride-hailing companies, Uber finds itself needing to find profitability. Being profitable will mean cutting costs, improving its algorithms and figuring out how to increase its margins across all of its products lines including UberEats. Considering Uber lost 1.1 billion last quarter, there will be continued pressure from the market and investors who want to see that Uber can in fact generate positive earnings after years of intentional losses.

Get on top of your business and make sure you have developed strategies for understanding how profit is made by your business and what it gets used for. There is no single way to do this because entrepreneurs all understand their business differently. Some are more sales-minded and their understanding of profit is anchored to their sales targets. Other entrepreneurs are more financially-minded and their understanding of profit is anchored to being able to meet their obligations. The nature of a small business is fluid and so you need to find a strategy that works for you. Not knowing how your business generates profit is not a topic you can afford to be ignorant about. The longer you delay understanding it the quicker you will find your business in a tough spot.

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