Profit?

Wednesday, September 9th, 2009
Please let me share a Letter I received from one of our Members.

A story was told about an old store owner and his AIM graduate son. The
son was complaining to his father that the old man was old fashioned
and not using a modern financial accounting system in his store. The
son was asking how his father would know how much profit he was
earning. The old man replied that it was easy. "I started this store
with an empty pocket, so what I have now is the profit."

Although the above story was too simplistic. I would like to add the
sentence "after deducting the debt is the profit." It saddens me
that many new enterprising businessmen I know fail after a
spectacular start because they forgot about the word "DEBT."

Usually when you start a new business, Your heart and soul goes into
the business. The business will naturally flourish after a while. You
start to get a big float in the bank because of the longer credit
terms or loans available to the businessman. Then you get
blinded  with all the money in the bank. You start to relax and
start spending the money in unproductive items like expensive
houses, fancy cars, unnecessary travel trips, high personal
consumption, gambling, wine, women and song. If the economy
is in the upturn and sales go up, the deficit can easily get
covered However, if there is an economic downturn and sales go
down, the time of reckoning will come and the business goes bankrupt.
All because you forgot the word "DEBT."

Best regards,

Willie

Posted at 05:30:00 AM, PST in  Business 

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