Profit or Wealth?


You had a great year last year…or you had a great couple of years…
Even if you had a loss last year…
What do you have to show for it?

Profits are great. Obviously you need profits which are turned into cash for business survival.

But, are you building wealth? It’s great to have profits year after year, but if you are not building wealth in your business, are the profits really enough?

Listen here to my conversation with Kevin Price of the nationally syndicated Price of Business show about this topic:

An example from two industries – restaurants and HVAC contractors:


Restaurant owner #1 had a great weekend. The restaurant revenues were amongst the highest they had ever had. The restaurant owner was thrilled with the profitable weekend. Unfortunately the restaurant owner didn’t really know who was dining in the restaurant. He did not get the names of the diners, birthday dates, or other pertinent information to turn those diners into clients.

Restaurant owner #2 also had a great weekend. The restaurant revenues were amongst the highest they had ever had. They added 15 new diners to their frequent diner program. They asked for and received these diners’ names, birthdays, anniversaries, and an email address to contact them. These 15 new diners could be send emails, special invitations to dine, a free desert or specials on their anniversaries or birthdays. They could be enticed to return time after time.

Which of these two restaurant owners really had a great weekend? The second. He built wealth.

HVAC contractors:

This is the real story of two HVAC contractors. Each contractor had 10 profitable years. One built his customer maintenance base and saved money. The other spent all of the profits and didn’t build his customer maintenance base.

The economy tanked. The contractor who had built the wealth (maintenance customer base, i.e. recurring revenues, and cash savings) survived the downturn. The other filed for bankruptcy and went out of business because he didn’t have the wealth to survive the downturn…even though he had 10 previously profitable years.

Perhaps a great year should be defined not only in profits, but in how many new recurring revenue customers you added and retained. Recurring revenue customers are your future wealth and future profits. The more recurring revenue customers you have, the wealthier your company is.