BUSINESS INCENTIVE -
FOR DOING BUSINESS
The business incentive for doing business is to make a profit.
Purpose of Business
The purpose of business is to make money. Businesses make money by providing goods or services that are needed and wanted by others.
The buyer of the goods or services is the consumer. The consumer's needs and wants are met only because there is incentive for businesses to produce those goods or services.
Businesses are not machines that can just crank out goods and services without incentive (profit). Businesses are owned by people that have survival needs and goals at stake.
Employees work at a business for their own incentive, the opportunity to make money. Earning money is their incentive to work.
Just like the people that work at the business need to make money (incentive), so does the business itself.
Profit is the Business Incentive
JFK - Path to Prosperity
Posted By: LibertyPen
Businesses need to make a PROFIT to exist. Profit is the incentive for a business to survive. The consumer benefits because businesses have the incentive to exist.
Because there is a business incentive for producing goods and services, there is also competition for producing goods and services for the consumer. Because there is a business incentive and competition, the consumer benefits by getting the best quality goods and services at the lowest price the market will bear.
When you reduce the business incentive (ability to make money) there is less competition, quality of goods and services drop and you get higher prices.
Businesses should be supported, not targeted as a pejorative. The consumer needs businesses. A business needs the consumer.
Optimum Price for Goods and Services
The optimum ceiling price is at, what the consumer base is willing and able to buy, "what the market will bear". The bottom price businesses need, to exist, is a price that covers the costs of bringing the goods or services to the market. The profit margin is the difference between the costs and the consumer purchase price. The profit margin is the business incentive.
An increase in price does not always benefit a business's ability to make money. The consumer does not have unlimited discretionary money resources to buy goods and services. When the price of basic goods or services increases, there is less money remaining to purchase discretionary goods or services. When wages are stagnant or declining and prices are increasing, there are fewer consumers that can participate in the market. If the means of the consumer drops, so does the price "the market will bear".
If there are fewer consumers participating in the market for goods and services, there is less demand for goods and services. If there is less demand for goods and services, businesses have less need for employees. If there are fewer people earning money, there are fewer consumers that have money to purchase goods and services.
If there is less demand for goods and services, there is less profit being made.
For businesses to have a business incentive to exist, they need a profit margin that is flexible to the market place.
Costs of Doing Business
What drives the costs of doing business up?
- When government creates more and more regulations that need to be complied to in order to do business, it costs more money for compliance. Government regulations raise the costs of doing business.
- When government raises the cost of permits, fees, dues, taxes etc., it adds more expense onto the costs of doing business.
- When people have the right to sue for all the company is worth and more, that tends to add to the costs of doing business.
- When there is product recall scares, real or made up, it adds to the cost of doing business.
- When labor insists on higher wages and more benefits, without increasing production value or they will shut the business down, that tends to add to the costs of doing business.
Is this an environment friendly to business or hostile to business?
When the costs of doing business increases and the consumer's ability to purchase drops; there is less profit. When there is less profit, there is less business incentive to do business. As a matter of fact, the rising costs of doing business coupled with a lowered ceiling price have squeezed many businesses out of existence. That is a loss of jobs; a decrease in market competition and a rise in prices.
It is the consumer that pays the price of a loss of competition.
If you don't make plans for yourself, you will likely have to fit into someone else's plans. #DarrenSupport
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