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.

Rose Helen

Shop Owner
I'm Rose Helen, Senior Marketer at Netbase JSC
Woking as a marketer in the digital age, my mission is not only to master the principles of Marketing but also to make friends with customers, represent them to understand and provide useful information that they are really interested in. Understanding digital tools to create the best experience for customers.

I really love market analysis, customer behavior research. I have participated in many projects in different fields. And now Netbase is the stop for me to go deeper into the field of technology. All products and services are improved and developed based on research results and customer feedback. Therefore, as a professional marketer, I not only get to know you (our customers) but also research your customers (the second audience directly uses our products).

With 5 years of experience I have equipped myself with skills such as: Market research, user behavior analysis, user experience, competitor analysis, SEO, product marketing planning, Orientation creates success many generations. When writing some sharing or instructional content, I always put myself in the position of my customers to know what they need? What they want I want to share my experience with everyone.

I hope you will get some value for yourself. My stock is all for the purpose of bringing a certain value to the readers. It would be great if you leave some feedback in the comment section about anything. I will absorb and try more. I wish you have a great experience after using our products.
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