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How To Set A Balance Of User Growth Vs Profitability

Posted on the 17 April 2019 by Martin Zwilling @StartupPro

How To Set A Balance Of User Growth Vs Profitability

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  1. Pick an idea that has the potential to make money. That means it solves a real problem for real customers who are ready and able to spend real money. The number of current potential customers is large and growing. Solutions that may be viewed as “nice to have” or “satisfies a higher-level need” won’t get funded.
  2. Design a product or service that you can sell. Sure, you may need to give the product away for free to get traction, but assume you will have to sell something someday to get profitable and stay alive. MySpace, for example, launched in 2003 and boomed for five years without a revenue model. When their deep pockets went empty, Facebook stepped in, but demanded revenue from ads. MySpace wasn’t ready for this, and it soon faded. Don’t count on finding investors supporting growth alone on your new startup.
  3. Build a business plan for profitability in your lifetime. This simply means you need to be sensitive to costs, revenue projections, and a timeline, such that there is light at the end of the tunnel. Most Internet businesses should show profitability in two years, while new medicines may take ten years to pass FDA and other safety tests. Investors will look at competitors in your industry for the norms.
  4. Identify the total investment required for profitability. A very common mistake of early stage startups is to request a small investment to get started. They are usually thinking only of costs required to get “in business,” rather than the total costs of marketing, scaling up, and going international. Be ready to answer the investor question “Is that all you need to get profitable?”


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