How can Patagonia survive as a company if it gives way all of it’s profits?
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You don’t need profits to survive.
Say you had a lemonade stand. You make 100 a day and it cost 50 to run. Your profit is 50. Now imagine if you just gave 50 bucks to charity everyday, you would make enough money to run the lemonade stand forever, but you wont make money.
Profits are only the money that is left after all costs are covered. As a company they would continue making/selling products. They would use the money made to pay all of their costs including employees and infrastructure and then anything left after that would be given to charity.
Profits are moneys that exist beyond operating costs
It is very easy to survive without profits, I have been doing it for many years
By definition profits are what you have left when you’ve covered all your costs.
Many companies just give those profits to the owners.
Giving it to someone who isn’t the owner doesn’t really change anything for the company.
Profits are, by definition, the money the company *isn’t* using for operation and other expenses. It’s what’s left over of their total incoming money (their *revenue*) after they subtract their costs.
Most businesses divide their profits among people who own stock in the business, through payments called *dividends*, so most companies aren’t keeping their profits around anyway. The only difference is where those profits are going.
Sure, there are many non-profit companies. The Catholic Church is a non-profit, and it’s been around for 2000 years.
The definition of “profits” could be stated as “stuff you don’t need to survive”
So if “cost” is everything you have to pay to make a product, and “income” is all the money you get in exchange for the product you make, then “profit” is what is left over, which usually the owner gets to keep as a thank you for making a business that works.
Crucially “Cost” includes not only the cost of materials, and the cost of labor to put those materials together, but also the cost of marketing and researching and developing those products. So when Patagonia sells a jacket, for less than it “cost” them to make it. That has to include the cost of paying the people who thought up what kind of jacket to make and made posters to sell it and so on.
And when Patagonia gets “income” for the sale of that jacket, they aren’t necessarily done paying for all the costs of being in business. They still have to pay their employees every week, including the employees who are going to think up new jacket designs for next year, and design and market and manufacture other things. The “profit” is only the stuff they are NOT going to use for that.
It’s a little confusing, because you hear a lot about small businesses “re-investing their profits” but it would be more technically accurate to say that they are “using money that *would have* been considered profit for more development costs”
The independent trust that now owns Patagonia is going to have to make the decision and the end of every quarter, to determine how much of the income Patagonia got needs to be used to pay for costs of their continued operation, versus how much is extra, how much is profit. Then they will use that profit to fight climate change.
I don’t know the company but if they give away only their profits (not their proceeds) they are paying all their expenses and only give away the left overs. No reason to have any problems
“Profit” is what’s left after the costs of running the company are covered. So *the company* is, by definition, fine. The money used to pay for manufacturing the products, to pay employees, or to pay rents for the physical stores count as costs of running the business, not profit.
Normally, the profit goes to the owner. A small business owner might use the profit to pay their rent and buy groceries, etc. A large business may not *have* a single owner, in which case the profit might be split among multiple owners, or shareholders.
The only person theoretically threatened by Patagonia’s move is the owner of the company. Presumably, the owner has another source of income, or maybe they already have enough savings to decide they don’t need the profit from Patagonia.
Now, if the company were to give away its **income** (which is what the company gets *before* the costs are covered), they’d be screwed.
**To use an example:**
I’m selling a cake. The ingredients from the grocery store cost me $10. My delivery guy charges me $5 to deliver the cake to my customer. I charge my customer $20.
So, my income is $20, but my profit (income – costs) is only $5.
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