What’s Right About Business Profits

I recently had a conversation with a teenager who was annoyed at Disney’s ongoing promotion of the movie “Frozen.” The young woman’s point was that Disney is a creative company and, by pouring so much time and resources into promoting “Frozen,” it was robbing its loyal customers of new material.

My response, that perhaps the reason Disney is promoting the heck out of this movie is because a lot of consumers must want more and are willing to pay more, wasn’t well received. “Disney has all the money it needs. They don’t need to continue promoting old material.” I suggested that Disney won’t always have all the money it needs if it doesn’t profit from its popular hits. That didn’t go over well either.

The concept of profit seems to be increasingly maligned and misunderstood. Every organization, whether it is “for profit” or “not for profit,” needs to make money in order to continue to exist. There is nothing wrong with making money and a lot of things right with it. An organization can’t pay its workers or purchase goods and services from other businesses if it doesn’t make money. And, unless it has a monopoly, a business can’t make money unless it’s providing a service that consumers want.

I would guess most people would agree up to this point. The friction seems to come when we try to parse profit into “fair” and “unfair,” “enough” and “too much,” or “reasonable” and “greedy.” These are all subjective terms. My definition of profit can be significantly different if I am a shareholder of Disney with my future retirement depending on the company’s success than if I am a consumer forking over $400 so my family of four can make memories at Disney World for a day.

As a consumer, though, it’s your responsibility to be aware of the way the seller is making money and to make informed decisions about whether a product is worth what you are being asked to pay for it.

When you purchase furniture or cars from a company, most likely a salesperson receives a commission. When you buy anything, whether it’s from a tiny part-time business or a huge international corporation, the owners of the company certainly hope to make some profit.

Is the amount of the company’s profit or the salesperson’s commission critical to your need, use, or potential enjoyment of the product? Not necessarily.

For example, if you’re just out of college, living in a cheap apartment, working at an entry-level job that you aren’t sure you want to keep, then a thousand-dollar sofa probably isn’t worth its asking price to you. Its level of quality or how much or little the salesperson or the company might make on the sale is irrelevant. For your needs and your budget, value is probably going to be found at a rummage sale or a second-hand store. And of course, even a second-hand store operated by a charity needs to make a profit in order to raise funds to support the organization’s mission.

The bottom line is whether a particular couch, car, or “Frozen” toilet seat is worth its asking price—to you. If you determine the price is too high or the quality insufficient for your needs, you can choose to “let it go” and look elsewhere. If you do, there is no sale and no profit for the company.

Profits are the lifeblood of business. Without them a business is not sustainable. As a consumer, you vote with your pocketbook every time you spend a dollar. And even to a company as big as Disney, your vote counts.

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