For Profit Businesses

Businesses are made for profit making, is there a question in this assumption or argument? For the time being, I am assuming there is no doubt about the argument that business exist for making profit.

I have been thinking about the topic of “measuring growth” I wrote recently. People may say there are businesses as “Not for Profit Businesses”. This concept of “Not for Profit” in many cases is about reinvesting profit in business rather than giving dividends to the shareholders/investors.

There are other businesses which are “social enterprise”, I wrote on such businesses with reference to a book “I have a dream”. These are businesses which exist for making profit; however their primary reason of existence is social upliftment with moderate profits. I wanted to ask myself – why not all For Profit Business be like that?

In my previous career engagement, a couple of times I had a chance to meet CMO of a big Mutual Fund house. In one interaction he told my boss – “you do X, Y and Z; Calculate your cost; add your 20% profit on that and charge me. I need this X, Y and Z done.” This statement was very liberal to hear. I had seen many organizations trying to squeeze their service provider. Thus the statement became a guide for me to think about such clarity and about fair co-existence. I relate the same to the previous post of “measuring growth”. When I tried understanding Islamic banking and asking the feasibility of the system, I saw contrary view points. I read somewhere Islamic banking does not call “interest” (on debt) as interest whereas terms it as profit sharing (say 20%). So there may be businesses so clear and there could be predictability in cost, profit and growth of business and economics.

This kind of approach is very simple. However, the above case is very simplistic and everything (many things) would become very predictable – how would finance experts – involved in complex transactions and certificates  – would be able to manipulate market? There can still be demand and supply gap and market may run into a relatively predictable and stable equilibrium.