3 Types of Profitability
Are you profitable?
Are you sure? (There's 3 types)
1. Unit Profitability
2. Operational Profitability
3. Business Profitability
1. Unit Profitability
This is where every time you make a sale, you make money. Most startups lower prices in order to make sales, so seasoned founders validate demand by making sure each sale brings in money. When this happens in a quick enough turnaround, your marketing spend becomes unlimited.
2. Operational Profitability
This is where every month or quarter your business bank account goes up. Most founders struggle here because they assume they have Unit Profitability... but in reality they were wearing multiple hats and probably not paying themselves. Financial Modeling at this stage avoids over-hiring and burnout. Not stopping here avoids being beholden to a third party.
3. Business Profitability
This is where you've paid back all investors (+yourself), don't require outside capital or debt to continue growth, and are profitable on a product and business level. Very few founders get here or even know that it exists. It's also referred to as having **** you money. This is where droves of capital allocators and experts come to you to "help" you... while they rub their palms and decide how much of your upside they will take. If you reach here, you will be able to select those with your values and ethics, rather than having to compromise on your standards and peace of mind.
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Apoorva Pande
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3 Types of Profitability
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