Difference between Money and Profit

profit and money the difference

My Father’s friend once came to me and said “my son entered our family business. He wants to buy Mercedes-Benz convertible as we made a turnover of $ 15 million last year. I am not able to make him understand that I cannot pull out so much money out of the business as I have to pay the creditors.” He was really worried. I told him to send his son over. When he came I made him understand the difference between money and profit

Sometimes it is really difficult to talk to people who do not listen to their parents. If the parents will recommend them to me it becomes less difficult. Talking in person with tools to make understand the basics does help. In the process their perspective of seeing things changes altogether and there is no parent – child psychology getting in the way!

It took just two sessions to make him understand the difference between money and profit. When he started to go through business, he realized that the credit term the suppliers gave to his company was just 30 days while the credit terms they were giving to the customers was 60 days. He realized that he should not get excited seeing the Top-Line. It is always the Bottom-Line that really matters. He soon had his eyes opened. During the group exercise when he was interacting with other senior business owners, he started getting a different perspective.  His father called me after a few months saying “ I do not know what you have done with my son. He has stopped mentioning buying the Mercedes-Benz. He listens to me and also to our chartered accountant. Whenever we are having a discussion he makes sure that we have the financial statements in front of us.” This is simply because numbers don’t lie but often our children see what they want and not what. Maybe a good post would be to look into the relationship of families working together…I will have to think about it.