Business stages

there seems to be a lot of taboo around acknowledging that being a profitable company is a key stage in the development of a startup. There seems to be a myth that focusing on profitability isn’t just a distraction, but almost the wrong thing for a startup to focus on.

But thats the thing, all startups are businesses, not all businesses are startups. All things being equal being profitable is not only a stage in the journey of a startup, its a prerequisite for product market fit.

How is it possible to claim you have product market fit, if you don’t have revenue?

Profitability also shows you know how to manage your costs and you understand your unit economics and how the feed into your pricing model, your hiring and OPEX management and how that all fits with your growth, revenue and churn.

I’d go as far as to say if the founders don’t understand profitability as related to the business model and plan, their probability of failure is extremely high, exception being given to those rare savants that come of with patentable ideas that are truly paradigm shifting.

with this in mind, being a profitable business is a stage in the journey of a company growing into a startup, they start to transition into becoming a startup when there’s sufficient revenue to justify process, automation and growth investment. At this point the business plan can reflect how investment can help the company grow and maintain profitability, even if that means that there is a period where growth supersedes profitability.

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