Just like many of you, I’m constantly seeing the startup with a new twist, a revolutionary way to stay in contact with your friends or a new way to access a plethora of content. Many of these websites and services have great value, some certainly not all.
What amazes me is the mindset of these companies. They are literally going against what I believe to be the very foundation and the history of business.
Let’s look at what a business is. A business operates on the basic premise of the sale of a product or service. Someone has to buy something. Whether it’s a direct sale of goods or the purchase of advertising, something has to be sold in order to generate revenue.
The companies which I see starting up every day ARE NOT following the basic premise of business. They are playing the “get more people” game. The more people we have the more “valuable” our business is. Now, this may be true from a “potential” point of view.
What about from a profitability point of view?
I don’t know about you, but when I see a company in the red having spent millions of dollars already with not a glimmer of profit in sight, I would be a little concerned for their future.
The idea which many of these companies have is to get bought out.
How long would you run your company without making a profit?
The whole scenario is akin to a kid at college. They don’t have a job, they run out of money and then call home to Mom and Dad to get more. In this case Mom and Dad are Venture Capital Companies.
I have to say that maybe I don’t understand the whole process. Maybe there is something more to which I don’t know about, but certainly from an outside perspective it doesn’t look too good.
My point to you is this. In order to stay in business a company has to turn a profit. If it doesn’t turn into a profit after a period of time I believe it’s called a HOBBY.
Is your business a business or a hobby?
Turn a profit and go to bed!