{"id":24434,"date":"2020-05-31T10:07:00","date_gmt":"2020-05-31T14:07:00","guid":{"rendered":"https:\/\/www.nevharris.com\/?p=24434"},"modified":"2020-09-01T01:51:02","modified_gmt":"2020-09-01T05:51:02","slug":"profit-maximization-vs-wealth-maximization","status":"publish","type":"post","link":"https:\/\/www.nevharris.com\/profit-maximization-vs-wealth-maximization\/","title":{"rendered":"Profit Maximization vs Wealth Maximization: What’s the Difference?"},"content":{"rendered":"\n

We\u2019re living in a world where profit maximization rules. But is the \u201cmake as much money as you possibly can right now\u201d strategy the best way to run your business? Or should you take a different approach? <\/p>\n\n\n\n

To be fair, there is value in profit maximization \u2014 but not when it\u2019s the sole strategy powering your business. <\/p>\n\n\n\n

That’s why, today, we\u2019re going to look at the difference between profit maximization and wealth maximization, and how to use both strategies to build a sustainable and profitable business. <\/p>\n\n\n\n

The Short-term Strategy: Profit Maximization <\/h2>\n\n\n\n

When surveying the state of your finances, there are two ways you can look at it. The first approach is called profit maximization, which asks: <\/p>\n\n\n\n

How much money are you making? And what can you do right now to increase your returns? <\/p><\/blockquote>\n\n\n\n

Although this approach may seem short-sighted, it does have some benefits. Let\u2019s take a closer look at the good and the bad of profit maximization: <\/p>\n\n\n\n\n\n

\n\n\n\n\n\n

The Good <\/h3>\n\n\n\n

Goal-setting: Rather than charge full-steam ahead into your business without any plan except to make money, profit maximization forces you to step back and set realistic and actionable short term goals. <\/p>\n\n\n\n

Real-time feedback: It can be frustrating to work towards a long-term goal if you have no real sense of the progress along the way. With short-term goals, though, you can see the effects on your business in real time. <\/p>\n\n\n\n

Efficiency: Profit maximization is directly linked to greater efficiency. That\u2019s because you have to be able to effectively handle larger volumes of work simultaneously. <\/p>\n\n\n\n

Reinvest in your business: With more cash flowing into your business, you won\u2019t have to delay the scaling your business. It can start as soon as you\u2019re ready for it. <\/p>\n\n\n\n

Stepping stone to success: Short-term success doesn\u2019t mean anything if you can\u2019t sustain it. But profit maximization does teach agency owners about the importance of being profitable from Day 1.<\/p>\n\n\n\n

Sellability: If you can demonstrate short-term success with your business (in addition to longterm viability), it\u2019ll be much easier to sell it down the road. <\/p>\n\n\n\n

The Bad <\/h3>\n\n\n\n

Non-existent long-term goals: There is a tendency for some agency owners to focus solely on short-term gains. This is a very risky way to run one\u2019s business. <\/p>\n\n\n\n

Disregards the time value of money: When calculating how to maximize profits today, agency owners can lose sight of the fact that money becomes more valuable the longer you have it. Which means that charging of outlandish prices today won\u2019t lead to as great a monetary value as reasonable prices charged over the long term. <\/p>\n\n\n\n

Compromised values: When your only goal is to widen the gap between your earnings and your costs, decisions are no longer made for the good of your company. Values are compromised in the quest for the highest profit margins. <\/p>\n\n\n\n

Cut corners: The only way to achieve a true profit maximum is by cutting costs so low that the integrity of the services or products suffers. When you cut corners, it\u2019s not just the customers who will suffer. It will be the reputation of your business, too. <\/p>\n\n\n\n

Low team morale: In an effort to cut costs, teams are either thinned out to the point of everyone being overworked or they\u2019re all paid a measly wage while being expected to work longer hours. <\/p>\n\n\n\n

Bottom line: While short-term profit maximization has its benefits, it\u2019s just not a practical or sustainable approach for business. At least, not on its own. <\/p>\n\n\n\n

The Long-term Strategy: Wealth Maximization <\/h2>\n\n\n\n

The alternative approach to finance management is called wealth maximization, which asks: <\/p>\n\n\n\n

How much money can you make? And how do you build a business today that ensures you reach that point of sustained success? <\/p><\/blockquote>\n\n\n\n

Let\u2019s take a closer look at the good and the bad of wealth maximization: <\/p>\n\n\n\n

The Good <\/h3>\n\n\n\n

Goal-setting: Wealth maximization gets you into a good habit of breaking up goals into incremental pieces that get you from Point A to Point B, and on schedule, too! <\/p>\n\n\n\n

Better business practices: You can\u2019t create a sustainable business without the right tools<\/a>, the right team, or the right processes. This approach will force you to strategize carefully and implement accordingly for the desired results. <\/p>\n\n\n\n

Cash flow-focused: It\u2019s not about profit. Wealth maximization is about creating the perfect balance in your cash flow<\/a> that can actually sustain your business over the long term. <\/p>\n\n\n\n

Value-focused: You can\u2019t increase the value of your company \u2014 and, in turn, its sellability \u2014 without sustained success, which means you have to consistently produce high-quality services or products<\/a>.<\/p>\n\n\n\n

Healthier mindset: Wealth monetization isn\u2019t about removing things now or cutting costs low so you can pocket more money. It forces you to constantly think about the future of your business, your team, and how you can help those you serve. <\/p>\n\n\n\n

Accounts for time value of money: You\u2019ll have a better grasp of the time value of money. In other words, the money you make today will have more value down the line if you can sustain your success. <\/p>\n\n\n\n

Risk-averse: This strategy mitigates for the risks of being in business. Considering how much the digital landscape changes as well as the natural ebbs-and-flows of working in a creative field, this is the only way to safely navigate them. <\/p>\n\n\n\n

Stable reinvestment in business: Rather than try to experience exponential growth all at once, wealth maximization allows you to steadily reinvest money into your business<\/a> so you can more effectively manage its growth.<\/p>\n\n\n\n

The Bad <\/h3>\n\n\n\n

Time management: The only real drawback to wealth monetization is that it requires a lot of planning and execution. If you struggle with time or project management, this might be a problem for you. <\/p>\n\n\n\n

Bottom line: The benefits of wealth monetization are overwhelmingly clear. Just keep in mind that profit maximization (on a reasonable scale) is a necessary part of acquiring long-term wealth. <\/p>\n\n\n\n

Wrap-Up <\/h2>\n\n\n\n

What\u2019s your goal? <\/p>\n\n\n\n

Do you want to create a business so successful, with a team so reliable, that you\u2019ll one day be able to step back and solely focus on the things you enjoy doing? <\/p>\n\n\n\n

Or\u2026 <\/p>\n\n\n\n

Do you want to create a business so successful, with a team so reliable, that you\u2019ll one day be able to sell it and use those profits to live the life you\u2019ve always wanted? <\/p>\n\n\n\n

Either way, you win. As does anyone who\u2019s come into contact with your business along the way, be they employees, clients, partners, and so on.<\/p>\n\n\n\n

However, the only way to achieve this is with a healthy mix of goals aimed at present-day profitability and long-term wealth. With both in place, and with a clear vision of where you want to take your business, you\u2019re sure to go far. <\/p>\n\n\n\n

Want to learn how to become a mastery of your own finance management? Sign up for the Cash Flow Made Simple<\/a> and set the wheels in motion today! <\/p>\n\n\n\n\n\n

\n","protected":false},"excerpt":{"rendered":"

We\u2019re living in a world where profit maximization rules. But is the \u201cmake as much money as you possibly can right now\u201d strategy the best way to run your business?…<\/p>\n","protected":false},"author":10,"featured_media":25158,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"episode_type":"","audio_file":"","cover_image":"","cover_image_id":"","duration":"","filesize":"","date_recorded":"","explicit":"","block":"","filesize_raw":"","footnotes":""},"categories":[27],"tags":[],"yoast_head":"\nProfit Maximization vs Wealth Maximization: What's the Difference? - Nev Harris<\/title>\n<meta name=\"description\" content=\"When the question is how to make money fast, profit maximization sounds like the answer, but how do you build wealth that lasts?\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.nevharris.com\/\/profit-maximization-vs-wealth-maximization\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Profit Maximization vs Wealth Maximization: What's the Difference? 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