July 10, 2019

Short-Term vs. Long-Term

Another reason you calculate profit ... profit allows you to understand the tradeoff between short-term profit and long-term profit.

You should calculate profit per new customer. Right? Right??

Say you acquire 10,000 new customers and you lost $24,000 doing so. Your profit per new customer is ($24,000) / 10,000 = ($2.40). You lost $2.40 to acquire each new customer.

Ok, now you probably calculate lifetime value (or some derivation of it) ... right? Right?? Let's assume you calculate LTV. You know that the customer delivers $11.88 profit in year one on the file.

You lost $2.40 acquiring the customer.

You generate $11.88 within just a year.

Yup, that's a good decision. You want to do MORE of this, don't you? You want to ask your CFO for more money, because the short-term loss is actually a long-term profit.

Then you execute your plan and sales increase by 10% ... all because of YOU ... because you calculated profit. Everybody in the company benefits, Management earns a healthy bonus, and it's all because of YOU.

Yes ... YOU!

Calculate this stuff, ok? It's like printing money as far as future career salary potential is concerned.

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