Should Startups Focus on Profitability or Not?
As a startup company, there are a lot of things that must be confusing and must be dealt with. More so, as more and more startup rise, the old question rises as well - should startups focus on profitability or not?
A lot of startup companies end up confused as to what is the best direction that they should head to. Everyone wants profitability and growth in the long run of course, but in the meantime, which between the two must you focus on?
To answer the question of which to focus, profitability or maybe growth, there are many factors that must be considered to get the right answer. There is the state of economy, the kind of startup you are, the fundraising climate, your competitors, the market opportunity and more. Your objective for starting a business is also one of the factors which will affect your decision of where to focus on. The thing is that, when it comes to startup, you don’t usually have unlimited funds, right?
Profitability VS Growth
Most startups do not have unlimited funds and are struggling with funding the business. In the case of whether to focus on profitability or growth, ask yourself first – When do you think your company will become profitable? When do you think will be the time that your company will be self-sustaining? When it says profitable, know that growth is included in the whole equation seeing that it is needed for competitive advantage.
But considering the factors mentioned before, you can already have an idea of how to proceed. For example, if the economy is soft than means that you must protect your cash reserves until the economy become stable. With the economy being so vulnerable, it is easy to lose your investment if you do not take precautions on your startup finances. On another note, if the financial climate is a lot better, it is the time that you can feel comfortable in focusing on growth.
Another factor that can affect whether to focus on growth or profitability is your goals why you decided to build a startup. The question is – was your goal to simply earn money as a lifestyle business or is it your first step of dominating the business world? You see, depending on your choice you can already figure out whether to focus on profitability or not. If you build your business to have a lucrative lifestyle, then it is apparent that profitability is where you should focus on.
Balanced Profitability and Growth
If you want to dominate the business world, this is a different case in the matter. Of course, being startup it is advisable that you focus on profitability until the time that you can sustain yourself. But profitability and growth can be balanced so you can slowly move on the next step of development.
To make that possible, the formula is to pick an idea with great money-making potential, a perfect product or service to sell, well-thought of profitability business plan and knowing the total investment you will need to make that profitability. Knowing these things will be the start of how you can ensure your startup profits and grows well.