Breaking News
Comments
Newest First | Oldest First | Threaded View
Peter Clarke
User Rank
Blogger
Re:
Peter Clarke   8/16/2013 2:08:25 PM
NO RATINGS
@prabhakar

While i agree that some loss making may be necessary in some product or service introductions one must be wary.

All too often this is used as an excuse to pour good money after bad rather than addressing flaws in the business plan.

If you have a solid plan that justifies a quarter or even year of loss...but then profits thereafter there need to be metrics that show you are on course.

Otherwise it is easy to say "We are not making a profit because we are still in year 1 or year 2 and we are not meant to."

 

SimonBarker
User Rank
Manager
Re:
SimonBarker   8/16/2013 7:20:22 AM
NO RATINGS
Selling at a loss, while it may seem an attractive way to penetrate the market can back fire. Firstly it is very difficult to raise your price once you've sold x thousand at a cheaper price - try telling your distributors and retaillers that they need to pay more, they won't be happy. Instead you should look to have a small margin and increase it with cost savings through scale - a subtle difference but an important one.

 

Also, a knock on effect of being profitable as early as you can is that you can get better investors - by that I mean customers. While VC investment is all well and good, there is no better money than that from a customer in the form of a sale and its profit.

prabhakar_deosthali
User Rank
CEO
Re:
prabhakar_deosthali   8/16/2013 6:48:54 AM
NO RATINGS
I agree with all the points raised in this blog.

I would like to add some more.

When a new company tries to sell its product in the market, it should not expect to make profit right away. To be able to penetrate the market you have to offer your product at a very attractive price even though at certain loss to you. That loss should be counted as advertising expenses. Once the product gets entrenched into the market and the required market pull for your product gets created , you can always start selling your product at premium price.

But this means you should have pockets deep enough to absorb those initial losses and also conviction that your product is finally going to win the market.

Peter Clarke
User Rank
Blogger
Re: Revenue = Success
Peter Clarke   8/16/2013 5:01:20 AM
NO RATINGS
There is also the the filtering effect of hindsight.

For every Google and Facebook that built usage first and then went after monetization there are probably tens of thousands of other software, internet startups that tried the same approach and failed.

And in a way ......usage is key indicator as much as sales..

Usage of www.google.com is a kind of sale at $0.......

Which Google then monetizes through Google Ads and other things.

 

chanj0
User Rank
CEO
Revenue = Success
chanj0   8/15/2013 3:00:20 PM
NO RATINGS
No doubt revenue will drive startup to next stage, towards profitability. Without enough revenue for a too long of a period of time means only 1 thing, the fall of the company. I very much enjoy and appreciate the points that Barker raises. To wannabe entrepreneur, all those questions shall be answered prior to launching a startup business. You may argue Google and Facebook didn't have a clear path to revenue until a lot later time. It might look like so. The main difference to most other business is Google and Facebook are launching a new kind of product/ service. They had yet figured out the business model and more importantly, their revenue is heavily relying on the information in the Internet. The information will value more with time. For most startup, the scenario of Google and Facebook will not be applicable. Nowaday, even if you are trying to launch similar business, you may still want to examine the questions that Barker raises. The nature of enterpreneurship is uncertainty. Yet the more certainty you have found; the better chance you will have. Read the questions, study them. If you have come up more questions to develop certainty, I have my ears up.



EE Life
Frankenstein's Fix, Teardowns, Sideshows, Design Contests, Reader Content & More
Max Maxfield

Some Days You're the Pigeon, Others You're the Statue
Max Maxfield
6 comments
I was watching the travel channel on television the other evening. It was some program about Madrid. The thing I really noticed was the plethora of statues all over the place.

EDN Staff

11 Summer Vacation Spots for Engineers
EDN Staff
20 comments
This collection of places from technology history, museums, and modern marvels is a roadmap for an engineering adventure that will take you around the world. Here are just a few spots ...

Glen Chenier

Engineers Solve Analog/Digital Problem, Invent Creative Expletives
Glen Chenier
15 comments
- An analog engineer and a digital engineer join forces, use their respective skills, and pull a few bunnies out of a hat to troubleshoot a system with which they are completely ...

Larry Desjardin

Engineers Should Study Finance: 5 Reasons Why
Larry Desjardin
46 comments
I'm a big proponent of engineers learning financial basics. Why? Because engineers are making decisions all the time, in multiple ways. Having a good financial understanding guides these ...

Flash Poll
Top Comments of the Week
Like Us on Facebook
EE Times on Twitter
EE Times Twitter Feed

Datasheets.com Parts Search

185 million searchable parts
(please enter a part number or hit search to begin)