Ensure That the Business Is Increasingly Profitable

In a free society, profitable companies pay their employees well, sustain a number of vendors, satisfy a number of customers, fulfill stockholders investment objectives, and pay taxes to local, state, and federal governments (actually companies collect taxes for governments, as only people actually pay taxes). Companies that are unprofitable and cannot meet their bills are eventually sold or liquidated. In any event, a great many people lose their jobs beside the manager, and the stockholders investment suffers or is lost altogether. This is the ultimate test of management. If you can t run your company to make money, you won t get to run your company for very long. 

Ever hear the old joke, we lose money on every unit sold but make it up on volume It never ceases to amaze how many managers think they can sell products at less than full cost as long as they recover out-of-pocket costs and make a contribution to overhead. In the oil industry, this is called selling incremental barrels. The big hole in this idea is that all those customers who 

If your company loses money in a month, and there is no foreseen reason for it, you should establish the cause and correct the situation as soon as possible. If your company loses money for a quarter, then you had better rediagnose the problem and fix it immediately, because you are unlikely to have the luxury of another quarter of losses—your boss will probably decide that you are not up to handling the issue and replace you. 

this is not to say that there are no holds barred where profits are concerned. Running a business is just like living your life— you must respect the law and deal ethically with your vendors, customers, employees, and stockholders. Managers who break the law usually wind up in court, and managers who treat others unethically quickly get a reputation that harms their business and their own careers. It may take a while, but people who are always testing the limits will find them, but usually not imtil it s too late. 

Around the turn of the past century, a number of financial scandals surfaced when several well-known, publicly held Internet companies declared bankruptcy after years of reporting constantly rising earnings. How could this happen It turns out that questionable (if not fraudulent) accounting practices were used to hide losses or to report loans as sales revenues. We are not likely to see such manipulation go unnoticed in our industry because manufacturing is well known to be a cyclical business. Stock analysts would 

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