The first sentence in a business course states that a business strives for profit maximization. Yes, profitability is one of the most important indicators for a feasible business operation. A business that cannot generate profit over the long term either dies or becomes dependent on external support to sustain its existence. While a certain period of losses can be tolerated in the startup phase, being profitable in the long run is inevitable.
However, is it enough for a business to be merely profitable? In today's world, every industry and individual are becoming increasingly sophisticated. Needs and demands are diversifying and becoming more refined. Therefore, a business being profitable today does not necessarily mean it will be profitable in the future. Staying profitable is important, but for that, the business needs to be of high quality. Quality, however, comes with a cost and takes a share from the profit! This is where things get confusing...
In simple terms, we can think of the business theory in a balanced approach, much like the balance in economic theories. On one side, there is profit, and on the other side, there is quality; if one weighs more, the balance is disrupted. The art lies in growing profitably - which CEOs and CFOs primarily look at - and at the same time, growing with quality, maintaining a balanced scale. Of course, ensuring quality incurs costs. The key here is to know and be able to sustain how much of the cost of quality to bear for profitable growth, not momentarily but in the long run. Even large corporate firms can face significant uncertainties in this regard.
History has shown that a consciousness of quality becomes inevitable in creating value in the long run. Therefore, annual profitability figures are like the rearview mirror, and quality improvement is akin to the headlights showing the way forward. These two factors, like arms and legs, must be coordinated. The coordination of these elements is up to you. There are many factors, such as invisible human resources, brand, perception, and consumer sentiment, that are not visible on your balance sheet. Management is a complex process. Remember that not everything in business is mathematics!
Dr. Bilinç Dolmacı
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