Volume 8, Issue 6 - November/December 2006

Field of Vision

Profit or Non-profit? 
by Charles Cumpston

A very interesting thread on the AGRR Magazine/glassbytes.com Message Forum recently discussed what makes a good business model and the question of profitable versus non-profitable jobs. 

There was difference of opinion about what makes a successful business plan, because what can be successful for one company is not necessarily a success for another. There can be big differences from market to market and in the circumstances from company to company.

One big point made, however, was that too many businesses are doing unprofitable work, whether they know it or not. The emphasis here was on mobile jobs. Some posters were making the point that, at todayís reimbursement prices, companies are losing money on mobile work, therefore, doing this kind of work is an unprofitable business plan.

Others countered that mobile work is not necessarily unprofitable, and some pointed out that they charge for the service. Others simply stated that doing mobile work in their market is not optional as this is the primary type of job and all the competitive AGR shops offer the service.

Another hot area of the discussion was the decreasing amounts some insurance companies reimburse for jobs. A number of posters said that at the rates certain insurers offer, they just say no to the insurer and let it worry about who is going to take the loss on replacing the windshield for the insured.

Like many of the posters, I found the discussion enlightening. We have tried to stress through the years the importance of having a well thought-out, successful business plan. We have also pointed out that no company stays in business doing unprofitable work and that volume does not make up for lack of profit. Every business has to know its costs and be able to know if a job is going to be profitable or not. If that business then decides to go ahead and do the unprofitable job, at least it knows that doing the work will result in a loss and if there is justifiable reason for doing that, then there is no illusion.

Our industry has undergone enormous change in the last decade. What was a successful business plan in 1996, let along 1986 or earlier, is not necessarily a winner in todayís market.

And no business continues to be successful if it doesnít have a successful business strategy that allows it to be profitable. Pretty simple, isnít it?

In that sense, the posters on the Forum thread had it right. In todayís market you canít just accept a job for the price that itís being offered. You have to know if it will be profitable for you or not, based on the business plan youíre using to run your business. (Letís not even get into companies that donít even have a business plan.) 

I donít know anyone who is running their company as a non-profit. Letís leave that to the associations and other standards-setting bodies which are operating under those rules.

For a company to compete successfully in todayís market, the color at the bottom line has to be black, not red. Profit, yes. Way of achieving it, variable but tied to a successful business plan. 

AGRR
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