Profit Vs Value

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Which should a start-up focus on in its early stages?

Have you ever started a business or thought of starting one? If so, then you know that making a profit initially might pose itself as the most difficult thing ever. A lot of business owners who are only profit-driven end up giving up on their ideas and dreams after a short period of time simply because they didn’t make a profit.

Making profit in the initial stages of a business is often viewed by a lot of business owners and entrepreneurs as the primary focus while creating value is perceived as the secondary afterthought.

It is important to state that the objective of every business, in the long run, should be to maximize profit (except for maybe NGOs and Government organizations). However, in the infant stages of a business, which should be of greater concern? Profit or Value

Value is the satisfaction you derive from the consumption of a product or service. Value can also be derived in the process that leads up to the purchase. Value creation can also be seen when businesses increase the quality of their product, utilize resources in increasing the technical know-how of employees and train employees on proper customer service relations.

Zig Ziglar-an American author- once said: “You don’t build a business, you build people, then people build the business.”

Profit, on the other hand, can be viewed as the returns a company makes after subtracting all costs from revenue. Profit-making should be the driving force behind the start-up of any organization, but it is important to note that value creation should be considered just as important as profit maximization.

Confucius-a Chinese philosopher- once said, “If your conduct is determined solely by considerations of profit you will arouse great resentment.” A lot of businesses who are only profit-driven take actions in the hopes of increasing their returns at the detriment of the quality and value of their product or service.

The importance of value creation in the early stages of a business cannot be overemphasized as this provides a solid foundation for which the business can be built. Creating and delivering value in an efficient enough way will generate profit after cost.

It is important to note as well that when a business has value, future changes in the price of the product or service won’t deter customers from purchasing as value creation also builds customer loyalty. It is safe to say that value creation leads to business longevity which in turn leads to sustained profit maximization.

When you create value, you build loyalty and when you build loyalty, you make a profit.

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