I was annoyed with an IRS agent a week ago who criticized my client’s business. This young businessman client grossed about $100,000 per year in each of his first two years but declared little net income due to high start-up costs. The agent said “Why does he get up and go to work each day? He would do better staying home.” I kept my thoughts to myself; correcting the IRS agent would not have helped my client at this point. Then yesterday I read a post by a fellow accountant reminding us that the purpose of a business is to earn a profit. Usually, but not always.
There are many good reasons to be passionate and committed about the purpose of your life’s work. Profit may be one that’s high on the list for reasons to rise and greet the day, but it is not the only one.
Even if we are only looking at financial motives, a good business does not need to earn a profit. Some businesses, like farms, real estate and energy ventures, for example, lose money every year of their operation but can expect to generate a net return on capital upon dissolution and sale of their assets.
In my own case, only one of my three primary for profit businesses generates a significant positive net income. But that doesn’t mean that the other two are worthless; I am equally committed and excited by all three. Only time will tell, for example, whether my seafood aquaculture business will succeed or whether will it be entirely devoured by the effects of sea level rise and future storms. Its success is largely outside of my control but I’m excited to be involved nonetheless. The third business’ success is largely dependent on future tax laws; god only knows how that will unfold.
Similarly, I am involved with many nonprofits businesses that will never earn a dime of profit but are nonetheless worthy of sparking excitement to get up and start the work day. They contribute to the economy and our lives every bit as much as any for-profit enterprise.
I can only hope that future life experiences will help convince others that earning a profit is not the only worthy purpose of business activity.