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What is profit?

profit

We know – you’re thinking ‘Profit isn’t a marketing phrase, it’s a financial expression!’ And, of course, you’re right.

However, we can tell you that we spent a considerable amount of time during our marketing training, grappling with ‘Finance for Marketers’. There were a few headaches, but we’re glad we did it!

So, why have we included profit in the marketing phrases?

Because we truly believe you can’t run a successful business without understanding profit.

And actually it is more integral to marketing than you might think…

Before we go any further, let’s just establish what profit is:

There are, in fact, two types of profit – gross and net profit.

Gross profit is the amount of money left over from your sales, after the all costs associated with those sales have been covered. In the case of goods, this would be the purchase of the stock, including carriage, and any additional embellishments you have added to the product before selling it.

Net profit is what you have left after everything else has been taken away from the amount of sales you have made. So that means all your overheads, all your marketing, your employee salaries etc.

Now let’s return to why it’s integral to marketing…

Profit is an essential part of the decision making when it comes to price. Whilst you clearly can’t price products or services so high nobody will buy them, equally you can’t offer them at a price which means you won’t make any money. There’s not much point in running a business if you don’t earn anything!

And we know that price is very much part of the marketing mix

But equally every other aspect of marketing is a cost – that needs to be taken out of the profits. So it’s no good having grand “champagne” ideas for your marketing campaign, such as television or national press advertising, if you only have a small budget. Otherwise you will blow the budget, and your profit.

How you choose to get your product to the customer (place) will also need to be governed by realistic costs. For example, expensive dealer networks are not realistic for very small ticket items, but are very effective when add on services are needed. That’s why they work well in the technology sector.

We think you are starting to get the idea now…

So, before you start scratching your head about how you are going to improve your marketing, we want you to take a look at your profit and loss sheet.

Every ambitious business owner should know his numbers – if in doubt, watch Dragon’s Den!

If you would like to get your marketing sorted, give us a call on 01256 83 11 10.