Start Up Stories

“Higher Profits” NEXT EXIT

Posted in Uncategorized by Devon on March 2, 2009

“Product first” is probably a good mantra. In order to “test the market” you’ll need something to test with. A tough question is, how much time to spend on a logical business case with a path to profitability vs. reasonably well planned trial and error? While there is no closed-form solution to this question, it’s probably worth circling back to the question, “How are we going to make money in this business model?” pretty frequently. In a previous life, we spent too long in an unprofitable sector of the business that we’d ultimately work in, which was costly. However, we did build critical skills in that unprofitable market which we ultimately needed to access the more profitable segment where we ultimately built a highly profitable growth business. I’d have preferred to have started earlier in the highly profitable sector now in retrospect.

Lessons Learned and Questions to Ask
Despite the uncertainties of a startup, it’s critical to always be looking for the highest-value added applications for your technology. The difference between a 30% gross margin business and a 65% gross margin revenue-matched business is enormous in terms of business value.

Who is paying the highest prices for products and services in your industry? Can you access that market segment?

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