"Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them."
--- W. Edwards Deming
Too many small business owners are lured into the assumption that profiting from every project or business action is wrong. For various reasons --- public sentiment, media manipulation of facts, etc. --- business leaders believe that not all business is entitled to a profit. If the cost of production is high, we should all chop off the profit to make the bid for the job look more appealing.
This is wrong and is not what capitalism is supposed to look like. There are many estimating tools available to the sign industry and all of them take the cost of materials, plus the cost of labor, plus overhead costs to come up with a sub-total. Then, a percentage of profit is added to the estimate. This profit is the reason you are in business. Everything else covers the cost of keeping the lights on and paying employees, and more. The profit is not a gift, but is what the business earns.
"Entrepreneurial profit is the expression of the value of what the entrepreneur contributes to production."
--- Joseph A. Schumpeter
When discussing business topics with various leaders in our industry I note that some are proud of what they provide. They see it as a contribution to the industry, the community, and to even their customers. They know that they provide quality and aren't afraid of losing a job because they tacked on the profit they are entitled to.
There are others who are more timid and will cut their profit in order to get the job and keep the doors open. Of course, in some cases this is necessary, particularly in an extremely competitive segment of the industry and in down markets. But those are the exceptions. Many times we fear losing a contract so we tamper with our profit margins which in the long run may hurt our business.
"Between calculated risk and reckless decision-making lies the dividing line between profit and loss."
--- Charles Duhigg
It is never cut and dry that using a 15% or 30% profit multiplier works every time. It doesn't. Each job has its own variations and the profit factor may vary, but it should not be drastically reduced or eliminated. We should never be afraid to profit as running a business entitles us to our due rewards.
"Don't be seduced into thinking that that which does not make a profit is without value."
--- Arthur Miller
However, those times when we do cut our profits should serve as teachable moments. We really shouldn't kick ourselves when we undercut a project for the sake of gaining a foothold with a particular customer or a particular segment of the industry. We can profit in other ways by learning how we handled the job from estimating to bidding to project managing. We can even learn how to be creative in making up the profit by finding the same quality materials at a lower cost, uncovering new time-saving installation techniques, and lowering overhead.
We can take this education into other projects and do better the next time. And the next time, we will never be ashamed of taking a profit.
"The worst crime against working people is a company which fails to operate at a profit."
--- Samuel Gompers