Profit is one of the key factors to look at to determine if it’s worth running your own business
Share This Recap
Profit as a Metric
- Don’t hear a lot about this
- Doesn’t often apply to startups
- If you’re profitable and sustainable, you’re a business, not a startup
- VCs are in the business of funding your losses so you can grow big
- Really awkward to talk about profit
- Half will think you’re a fool for making so little
- Half will think you’re a fool for talking about so much
- Profit is what’s left over once you’re paying yourself a market salary
Why is profit important?
- Profit is your margin for error
- If you don’t have profit — and a problem happens — it can cause real damage
- At what point do you go from making revenue to making profit
- You could keep spending everything you make and never make a profit
- When do you decide when to become profitable?
Growth of Profit
- Minimum size to be viable — Need coverage when someone is on sales or traveling.
- Market — Small niche puts a limit on the size they could be
- Personal Goals — What do you want to achieve? (Goal: Never work for someone else again)
- Opportunity for Growth — Can’t know until you’re in the middle of it. If you can spend $1 and turn it into $5, do that as long as possible.
- Time — If your app is going to be obsolete in a year, take the profit now.
12 Years of Profit
- First 9 years? Net out to $0.
- Made one time sales, not recurring revenue
- 2009 — Switched to recurring revenue (SaaS)
- Profit is at the end
- If you keep switching, you’ll never get to the real money
- Profit isn’t automatic
- Very easy to spend
- Revenue/Employee (>$250k) — 80% of expenses are employees. Focus on increasing revenue per employee.
- Profit (>30%)
- Quality of Life — Take every opportunity to trade money for happiness.