Is maximizing profits in good financial times worth all the praise ProSales columnist Matt Ogden gave them in the Big Deals section of our September issue? We put that question out to members of our LinkedIn group and found that many agree: It doesn’t hurt to stockpile cash as long as you’re also considering pricing, level of service, and product quality. In other words, your margins should remain relative to your increased profitability.
“I don't see profits as an undulating scale,” says James Jurey, a sales consultant at Buck Lumber in Charleston, S.C. “At least, they shouldn't be. I like the term ‘profit protection.’ As a salesperson, I try to protect my profits by be being an unparalleled resource for my clients—going above and beyond, if you will. How this relates to the overall profits company-wide should be no different.”
New York City-based Sherwood Lumber sales rep Thomas Glauber agrees. “Maximizing profit is a responsibility of all managers,” he says, “but it must be in a context that creates synergy and benefit among customers, suppliers, and co-workers.”
Ogden stresses that the downturn taught dealers that cash is king and that building up a rainy day fund can help soften the industry’s cyclical blows. This means cutting unnecessary expenses and redirecting those into savings. “Every dollar of profit that could have been earned but wasn’t is a dollar that fails to get stockpiled into a war chest for bad times ahead,” he writes. “The bigger a business’ war chest, the greater that business’ margin of safety to survive extended downturns.”
Daryl Lucien, sales and marketing director at Cleveland-based B & B Distributors, isn’t so quick to agree with Ogden. To him, whether a business owner caps profits at a comfortable rate or aims to maximize them is “a matter of ‘business religion.’”
But, Lucien continues, “if there is a difference in how someone runs their business (war chest) and how they manage their home front (saving for a rainy day, retirement, any planning for the future), then there's cognitive dissonance in the that person's thinking,” he says. “There's always the issue of employee impact. How your decisions affect your employees financially is a high water line that says how you see yourself in the mirror.”