You make profits for nine days a year

Here's the most interesting thing I've read this year, on "why companies fail".

"Companies on average are only profitable for nine days out of the year. If you take all the profit—the net income—at the end of the year, and divide it by 365, and take the sales and divide it by 365, that’s all you’ve got, is nine days. So only nine days worth of sales, on average, go to profit.

That means that 356 days a year, you’re not making any money. It’s that razor-thin. It’s that damn thin. That’s scary. And if you go back and look at the year 2001, after 9/11, 40 percent of companies were unprofitable. So any one major thing that occurs to a company, it just wipes you out."

Also

"They’re so focused on the nine days, they can’t afford to have one mistake, one bad decision, one bad plan, one bad implementation. Then what happens is they get weak. And then, somebody comes along and just kicks the crap out of them."

Here's the accompanying pdf.  Try it for your business. See how many days you make a profit for each year.

Comments

[F0ul]

This is a load of statistical nonsense!
Firstly, there is no such thing as an average company, with average figures. Its like choosing the six most average lottery numbers and hoping to win big!

Secondly, companies are always evolving, and as part of that, their plans include multi year projects with the costs associated with that. These statistics are based on 12 month figures with an assumption that the company is always working at 100%.

Finally, there is the idea that being profitable on paper is a good thing. It is for shareholders, those who only see a company as being something to trade.
For most companies, showing a net profit just means a bigger tax bill - and who needs that?

[Seamus McCauley]

F0ul

I beg to differ.

The success of a given lottery number is of course meaningless: it indicates merely the blind operation of chance. The success of a given company is not: it indicates a valuable market, sound management, good strategy. The qualities of previously winning lottery numbers tell us nothing about which numbers will win in the future. The qualities of winning companies tells us a great deal about what works for a business. Your analogy is a false one.

Companies are owned by their shareholders. Companies have a legally-enforceable duty to maximise returns to shareholders. Insofar as a company can pursue any absolute good, that good is shareholder returns. What alternative good are you proposing they pursue?

Seamus