Is sacrificing profitability in favor of growth a good idea?
The story of Jeff Bezos running Amazon with ever-growing revenues and zero profits for decades has become legendary in the tech world. Initially, a part of the investment community believed that its razor-thin margins are a sign that the business is unsustainable in the long run. Nowadays, however, it’s widely accepted that reinvesting every single free penny into the business for two decades was the key strategy that made Amazon the world leader in e-commerce.
For such markets, rapid growth is not only desirable but often necessary. If you decide to take it slowly, one step at a time, you are risking that a competitor who is highly capitalized and investing aggressively in growth would surpass you. Naturally, becoming the market leader in a game where the difference between first and second place could be a few orders of magnitude is crucial.
If you are trying to build a monopoly in a market with strong network effects, this is rational behavior. This doesn’t mean, however, that it is rational for any new business. The Amazons, Ubers and AirBNB’s of the world are few. In such markets, scale isn’t the only thing that determines success, so it doesn’t make sense to pay a premium to achieve it. It would usually be better to utilize a more conservative financial and marketing strategy.is often used too widely. Not every new business is a startup. On the contrary—most aren’t. As Paul Graham puts it,For example, an IT consultancy is not a startup—it grows linearly, and because of this, sacrificing profitability for growth doesn’t make a lot of sense.
Deutschland Neuesten Nachrichten, Deutschland Schlagzeilen
Similar News:Sie können auch ähnliche Nachrichten wie diese lesen, die wir aus anderen Nachrichtenquellen gesammelt haben.
Is Sacrificing Profitability In Favor Of Growth A Good Idea For All Startups?Amazon owns e-commerce thanks to this strategy. Should you do the same for your startup?
Weiterlesen »
Is Sacrificing Profitability In Favor Of Growth A Good Idea For All Startups?Amazon owns e-commerce thanks to this strategy. Should you do the same for your startup?
Weiterlesen »
Uber Posts Record Bookings as Ridership Rebounds and Delivery Continues to GrowUber’s ridership rebounded strongly in the most recent quarter from last year’s pandemic lows and its food-delivery showed signs of strength even as in-restaurant dining picked up
Weiterlesen »
Selena Gomez Addresses The Good Fight's 'Tasteless' Joke About Her Kidney Transplant - E! Online'I am not sure how writing jokes about organ transplants for television shows has become a thing,' Selena Gomez shared after The Good Fight referenced her health struggles.
Weiterlesen »
Council Post: Building A Mindset For SuccessAdopting a growth mindset helps support growth and build resiliency at every level of your business.
Weiterlesen »
30 Non-Office Products That Are Still A Good Idea To Keep At Your Deskwew lad, okay so the ranking you're about to see is NOT a mistake: 🛍📈 Here are the top 5 shopping posts our readers were loving this weekend: 5️⃣ 30 Non-Office Products That Are Still A Good Idea To Keep At Your Desk
Weiterlesen »