Profit, Loss, and Value
Businesses can generate profits from the sale of goods and/or services. Profits are the financial reward that comes from taking the risk of running or owning a business. Businesses that suffer extraordinary losses during a short period of time, or slowly see their profits decline, may end up closing or filing for bankruptcy.
profits and losses
Profit is the amount of revenue or income that a business owner retains after paying all the expenses associated with the operation of the business. If the expenses of the business exceed the revenue or income generated from operations, then the business will suffer a loss.
The goal of most businesses is to generate a profit by increasing revenue while minimizing expenses. One of the best ways they do this is by providing their customers with value.
value
When businesses talk about value, they are referring to the relationship between the price a customer pays for the good or service and the perceived benefits the customer receives in exchange for their time and money.
Value has become such a key component of today’s business model that if you go to almost any fast food restaurant, you’ll find a “value meal” or “value menu” advertised. Such businesses are sending the message to their customers that they’ll receive the most “bang for the buck” or the highest value in terms of quantity obtained in exchange for money spent. It’s a business model based on the belief that if you give your customers value, then profit will follow. While all businesses seek to increase their revenue, what a business actually does with those funds can vary and depends on whether it’s a for-profit or nonprofit organization.