Money is the Root of all Business

Most people starting a small business do so because they have a passion that extends beyond the money. However, when it comes to small business, I beg to differ with Kevin O'Leary, who is quoted as saying, "The only reason to do business is to make money; that's the only reason for doing business."

Yes, the purpose of a business is to make money, and if that is your passion – then go for it!

Some people love flowers, and they turn that passion into starting a florist business. My knowledge of flowers is dismal, and any attempt on my part to start and operate a flower business would be unwise, to say the least. So, despite that ‘only reason to do business is to make money’ philosophy, I would most likely fail to make any money at being a florist.

Regardless of whether they are turning a hobby, or even a unique talent into a business, business owners start with a passion and a desire to make it available to others. It’s how businesses get started. Making money comes later.

Back to reality   

However – many business owners sooner or later get quietly disillusioned. They started their business with a great idea – a passion – but they soon fall into the money trap. Once caught, it is hard to escape. Idealism eventually turns into routine, and that’s when the owner’s view on business drastically changes.  Sooner or later, these business owners realise (rightly or wrongly) that there isn’t one problem in a company that cannot be solved by applying money to it. It may be to fix a problem. It may be to make a problem go away or to even avert a crisis. Regardless, if you are a florist, a world with not enough flowers is not a solution to any business-related problem. That’s when they realise – consciously or subconsciously – they are not in business to colour the world with flowers – they are in business for one reason and one reason only, and that is – to make money. Once they lose sight of their original passion, the downward spiral usually begins.

You may be thinking that this will not happen to you or to your business, that you’ll stay true to your dream, and it will, while things are going well. However, all companies experience problems from time to time. So, what happens then?

This is when business owners apply for Lines of Credit (LOC) as an available source of funds. Some even use their collected GST/HST, their Corporate Tax reserves or even Employee Source Deductions, as readily available sources of funds to see themselves past a messy period that they created. Unfortunately, when business owners consider these reserves as revenue – business failure is often imminent.

Public Corporations

In contrast, Public Corporations work slightly differently – right from the get-go, their purpose is to make money – lots of it – the more, the better.

Public Corporations fully understand the concept of how money works, but in their case, their size and quasi-monopoly (also known as business momentum) keeps them in business. Can you imagine a telephone company shutting down? It can’t happen – there is too much at stake. For all intents and purposes, it is a ‘vital’ service.

Public corporations are solely in business to make money. Outwardly, they are seen to provide a commodity or a service – but they cater only to their own desire to pamper their investors (people who buy stocks or shares in the company). Incidentally, investors do not particularly care what the corporation does, or how it does it. They are only there to maximise their ROI (Return on Investment).

The corporation only exists to capture as much market share as it possibly can. The plan is to extract as much money as possible from customers in order to satisfy the investors in such a manner as to make both parties feel they are getting their money’s worth. It’s a balancing act that caters to two masters.

Measuring happiness

Money is just a simplistic way to measure your success. If you have to review your Balance Sheet to see how happy you are, perhaps you need to take a step back, look at life and the reasons why you decided to get into business in the first place.

– 30 –

Good luck with your Business
Michael

© Copyright 2020 – Michael A. Coates – All Rights Reserved

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