Should startups care about profitability? More news at 10

There are certain topics that even some of the smartest people I talk with who aren’t startup oriented can’t fully grok. One of them is whether profitability matters. It’s common cocktail party chatter to hear people confidently pronounce that some well known startup is sure to blow up.

Or you know the other one — the one where Snapchat lost $2 billion in just one quarter. Two-fucking-billion! What a disaster! Except that they didn’t actually lose $2 billion in cash. It was a stock option incentive related “expense” but I bet you didn’t know that because in an era where we only read the headlines — they must be a train wreck losing billions. (They actually lost about $175 million in cash in that quarter, FWIW. See appendix if you want to know more on this.)

“How could they succeed when they’re not even profitable!”

If you hire 6 senior sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business for 6 months. Your profitability will go down for 2 quarters while your growth may increase dramatically in quarters 3–12.
I know this seems obvious but I promise you that even smart people forget this when talking about profitability. 70–80% of the costs of most startups are employee costs so what you’re really talking about when a company is unprofitable is that they are growing their staff ahead of their revenue.

Comments

  • dublaj
    February 10, 2021 at 5:53 am

    Very good write-up. I certainly love this site. Keep it up! Cristen Brandyn Hafler

  • indirmeden
    February 10, 2021 at 8:47 am

    Love the poem, I found the last bit quite chilling! Chicky Courtnay Handel

  • online
    February 13, 2021 at 10:47 am

    We are just a phone call away for Prefabricated, Panel, Reinforced Concrete and Tema Havuz Projects. Pools suitable for your request Tema Havuz assurance from the pioneers of the swimming pool industry. Brenna Tucker Sissy

  • turkce
    February 13, 2021 at 11:36 am

    Thanks for the auspicious writeup. It in fact was once a leisure account it. Danita Cesar Wendolyn Rochelle Silvain Garcon

  • turkce
    February 13, 2021 at 12:11 pm

    Hmm boats, islands, tropical weather. Can it get any better? Beverly Godart Kiah

  • turkce
    February 13, 2021 at 12:56 pm

    Amazing! Its in fact awesome paragraph, I have got much clear idea about from this paragraph. Merry Mitchael McAllister

  • turkce
    February 13, 2021 at 2:19 pm

    Thanks so much for the blog article. Much thanks again. Awesome. Gilberta Yuma Bast

  • turkce
    February 13, 2021 at 3:10 pm

    After all, we should remember compellingly reintermediate mission-critical potentialities whereas cross functional scenarios. Phosfluorescently re-engineer distributed processes without standardized supply chains. Quickly initiate efficient initiatives without wireless web services. Interactively underwhelm turnkey initiatives before high-payoff relationships. Holisticly restore superior interfaces before flexible technology. Arlee Merry Culley

  • turkce
    February 13, 2021 at 4:30 pm

    Awesome post. I am a regular visitor of your blog and appreciate you taking the time to maintain the excellent site. I will be a regular visitor for a really long time. Maddalena Ezri Alyce

  • turkce
    February 13, 2021 at 6:31 pm

    Way cool! Some extremely valid points! I appreciate you penning this post plus the rest of the site is extremely good. Cyb Cesar Fontana

  • Alexandr
    August 31, 2021 at 3:28 pm

    How he makes $300 per day – https://bit.ly/3mOAfVp

  • Escort girls
    September 12, 2021 at 7:55 am
  • Rosalba Motorcycle Oil
    October 20, 2021 at 12:44 am

    Everything is very open with a very clear explanation of the issues. It was definitely informative. Your website is very useful. Thanks for sharing.

  • buy anabolic online
    October 21, 2021 at 10:14 am

    Thanks for the good article, I hope you continue to work as well.

  • buy anabolic online
    October 25, 2021 at 9:31 am

    Thanks for the good article, I hope you continue to work as well.Спаситель на продажу

  • Tosha
    December 2, 2021 at 12:31 pm

    Wonderful blog! I found it while searching on Yahoo News.
    Do you have any suggestions on how to get listd in Yahoo News?
    I’ve been trying foor a while but I never seem to get there!

    Cheers

    Have a look at my site – anadolu yakası escort

Add a comment