I’ve been seeing an increasing number of founders discussing metrics like users, conversion rate, MRR (monthly recurring revenue). Missing from these metrics is profitability. A business’s goal is to make a profit. You may run the business for lifestyle reasons, financial reasons. However, if your business is not turning a profit, you won’t be in business for very long.
Some large startups like Shopify can survive for years without turning a profit (they still haven’t yet). Eventually even Shopify must turn a profit, or the company will inevitably fail. Justin Jackson has done a great quick presentation here to show you why profitability matters, and how to calculate your profitability percentage.
This article sums up everything that is wrong with tech entrepreneurs in this century. The perpetuating thought process that “you MUST go to the Valley to be successful” is ridiculous. Plenty of tech businesses have started outside the Valley and have been successful. There are actually a lot of benefits of being outside the Valley, which may even cancel out the benefits of being inside.
The other part of this article that got me frustrated was the attitude of these so called entrepreneurs. The pair seemed to want to do whatever it took to be successful; except actual business tactics like market research, launching their product, doing A/B testing, developing to make the product better, etc. Their whole goal was to find someone to give them a lot of money for their idea. An idea isn’t worth anything, until you combine it with great execution.