Should startups care about profitability?

There are certain topics that even some of the smartest people I talk with who aren’t startup oriented can’t fully grok. One of them is whether profitability matters. It’s common cocktail party chatter to hear people confidently pronounce that some well known startup is sure to blow up.

Or you know the other one — the one where Snapchat lost $2 billion in just one quarter. Two-fucking-billion! What a disaster! Except that they didn’t actually lose $2 billion in cash. It was a stock option incentive related “expense” but I bet you didn’t know that because in an era where we only read the headlines — they must be a train wreck losing billions. (They actually lost about $175 million in cash in that quarter, FWIW. See appendix if you want to know more on this.)

“How could they succeed when they’re not even profitable!”

If you hire 6 senior sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business for 6 months. Your profitability will go down for 2 quarters while your growth may increase dramatically in quarters 3–12.
I know this seems obvious but I promise you that even smart people forget this when talking about profitability. 70–80% of the costs of most startups are employee costs so what you’re really talking about when a company is unprofitable is that they are growing their staff ahead of their revenue.

— Colofão

Coordenação

Marcelo Ferraz (UFG/CNPq)

Nelson Martinelli Filho (IFES/UFES/CNPq)

Wilberth Salgueiro (UFES/CNPq)

Bolsistas de apoio técnico (FAPES)

Fabrízia Nicole Dias

Valéria Goldner Anchesqui

Bolsistas de pós-doutorado (CNPq)

Camila Hespanhol Peruchi

Rafael Fava Belúzio

Pesquisadores/as vinculados/as

Abílio Pacheco de Souza (UNIFESSPA)

Ana Clara Magalhães (UnB)

Cleidson Frisso Braz (Doutorando UFES)

Cristiano Augusto da Silva (UESC)

Diana Junkes (UFSCar)

Fabíola Padilha (UFES)

Francielle Villaça (Mestranda UFES)

Henrique Marques Samyn (UERJ)

Marcelo Paiva de Souza (UFPR/CNPq)

Mariane Tavares (Pós-doutoranda UFES)

Patrícia Marcondes de Barros (Doutoranda UEL)

Susana Souto Silva (UFAL)

Weverson Dadalto (IFES)

Além dos nomes acima muitas outras pessoas colaboraram com o projeto. Para uma lista mais completa de agradecimentos, confira a página Sobre o projeto.

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