Business: Asset or Liability?
Is Business an Asset or Liability for restoring our life-support system?
A business is a legal entity that is separate from its owners and is assumed to be able to continue to exist after the owners are gone because it can be self supporting by making profits. Yet 90% of businesses fail within five years because business is more than producing a product or service to sell.
According to the economic theory that governments use, businesses are supposed to use resources efficiently to create wealth while charging a price that covers all the costs while also reflecting the value the customer perceives of having the product.Yet how can they when businesses are allowed to ignore the cost of the damage to health & our life-support system (the environment) that they cause? All businesses create the past-time called a job even it is just the business owner. Big businesses employ lots of people in separated departments which become bureaucratic and do not communicate with other sections of business thus the business struggles to survive. The vast majority of new jobs are created by the small businesses who are willing to innervate yet governments only want to support big businesses such as the auto, chemical, oil or war industries.
Governments assumes that a business must be beneficial if it makes a profit so give them thousands of tax breaks such as treating director’s bonuses as not part of their salary even though the bankers got the bonuses when they made a profit or made the banks bankrupt and required a bale out from the Workers who fund the Government’s whims via taxation.
However by definition
profit is the excess money from customers over the price paid to supply the products sold to customers.
Therefore business can only benefit society if its customers do not live in the same society or if business can use money for a greater purpose than the customers can.
A Business can only increase profit by either increasing income from customers or reduce the costs they pay to supply the stuff they sell to their customers. This is achieved by
- Increasing the price charged to customers – If they perceive they are still getting value (or reducing the size of the product sold for the same price eg Mars bars)
- Increasing the number of people willing & able to become customers to support the business (by more effective advertising or giving incentives for gathering more customers like the American banks did to create their Sub-Prime Mortgage Fraud & the resulting Credit Crunch)
- Increasing the frequency customers come back to re-consume your product (by adding additive substances like sugar, fat & salt like the processed food manufactures do or booking follow up appointments at shorter intervals)
- Increasing the average spend of customers (with upsells like Amazon & McDonald’s or offers like 3 for the price of 2)
- Reduce costs by reducing the resources wasted in your production system
- Reduce costs by changing suppliers to those with lower wages / health and safety enforcement which is why most big business activities have been exported to China or India
- Reduce costs by buying the support of bureaucrats or enforcement agencies so you can avoid paying for the damaging effects of your pollution even if other businesses in your industry have to pay.
- Reduce competition by using your unique talents or by getting bureaucrats to insist all you industry use your services such as training for continued professional development.
Some businesses like Social Enterprises choose to be a benefit to their stakeholders (customers, workers, suppliers, society and the environment ) as well as shareholders because they realise their business only exists as long as their stakeholders are choosing to support them with their buying decisions over the various alternatives.
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