Is growth more important than profits for Startups?
Yes, but No
The short answer is yes, but it’s not a simple question.
Startups don’t have profits, they have sales. Startups are in the business of growing, and to do that they need to build a large customer base.
They make money by selling products or services to customers, and once those customers are on board they can generate revenue by providing support services or up-selling their product or service.
Growth is how Startups make money, and it can be measured by a variety of metrics such as users, sessions per user and revenue per user.
Measuring growth helps the Startup understand which marketing channels work best for them.
In addition, measuring growth allows the Startup to get answers to questions such as “How much should I spend on marketing?” “If I spent $X on marketing will I bring in $Y in revenue?”
Knowing what works will help the Startup focus their efforts towards the most effective channels that will drive revenue for them.
The key to growth is understanding your customer’s needs and why they are likely to buy from you.
Startups should approach growth from the perspective of solving a customer’s problem or need. The solution doesn’t have to be unique, but it must be easy and affordable.
Startups with a great product that solves a need will have no trouble growing their business. Startups with a great idea but that don’t solve any one particular problem will struggle to grow their business.
Conclusion
So, to answer the question, “Is growth more important than profits for Startups?” Yes, but it’s not a simple answer.
Startups have to be profitable in order to grow their business. Startups have to grow in order to make money.
It’s a delicate balance between building a product that customers love and providing them with a great experience on the site.
Growth is important because it is one of the few things that are completely under control of the Startup.
The Startup can direct their own growth by optimizing their site, marketing channels and customer acquisition strategy so that they can increase revenue per user.
This is why it is so important for them to understand what makes customers buy from them and how they can make it easier than ever before for the customer to do so.
About the Author
I am the Founder of Cudy Technologies (www.cudy.co), a full-stack EdTech startup helping teachers and students teach and learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
You can connect with me on Linkedin (https://www.linkedin.com/in/alexanderlhk) and let me know that you are a reader of my Medium posts in your invitation message.
