Dear Startup, Profit is a Mirage

NicolaProfit is a double-edged sword. On one hand, it’s one of the signs of a healthy business, and on the other, it means zilch – especially in a startup scenario.

By definition, a startup is an idea with the burden of proof – an unconfirmed customer base and a tentative business model. On this backdrop, profit can’t be viewed the same as in an established business.

What should a startup’s attitude to profit be? Forget it!

You read right. Profit should not be your primary focus for the first three to five years. Instead, mind your cash flow and put good financial management systems in place to help you through the uncertainties of the early years.

I’m not arguing against profit because you’ll probably make some from the start. But, I seek to correct the attitude and undue (profit) excitement that ends up blinding startups to the real issues.

Profit begins to make sense after you’ve crossed the threshold to become a proper business. This means that you’ve tested your theories in the market place, gotten feedback from customers and set up business systems that support your sales process. Before then, profit doesn’t mean much.

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