Most companies (98 %) in the world (even tech startups) should be very profit focused. Being profitable allows you degrees of freedom you don’t have when you rely upon other people’s money.
- You may have leverage when you DO need to fund raise. (There are many investors who are not looking to build enormous businesses who value the fact that you can run a business profitably)
- It allows you many more exit opportunities. While Google and Facebook will buy “acquihires” (at least as of Dec 2011), many acquirers hate the idea of buying companies that aren’t profitable. When they look at buying your company they often think in terms of “how long will it take until I earn back the profits to pay for my acquisition price?” If you’re not profitable you’re purely a cost center to them.
- Being profitable certainly makes your company more sustainable in difficult times.
The characteristics of somebody who should NOT focus on profitability include those who:
- Have or perceive that they have the opportunity to build an immensely scalable businesses. Internet scale.
- Have easy access to capital by investors who are committed to building businesses at Interent scale
