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Should Startups Focus on Profitability or Not?

Should Startups Focus on Profitability or Not?
There are certain topics that even some of the best journalists can’t fully grok. One of them is profitability. I find it amusing when a journalist writes an article about a prominent startup (either privately held or preparing for an IPO) and decries that, “They’re not even profitable!” I mention journalists here because they perpetuate the myth that focusing on profits is ALWAYS the right answer and then I hear many entrepreneurs (and certainly many “normals”) repeating the same mantra. There is a healthy tension between profits & growth. If you hire 6 sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business for 4-6 months. I know this seems obvious but I promise you that even smart people forget this when talking about profitability. Hiring more people isn’t always the right answer. Exec Summary: Most companies (98+%) in the world (even tech startups) should be very profit focused. Um, no,

How Facebook will take over the rest of the world in 2012 It’s hard to believe that in 2009, Facebook was insignificant compared to the rest of social media. Even harder to fathom is that one year later, Facebook asserted its dominance and became the undeniable leader of the social landscape, representing more than 50 percent of all time spent on social websites. It wasn’t certain whether Facebook’s fame would be fleeting, especially in the wake of privacy concerns, but in 2011, this doubt was put to bed when Facebook became the only social platform that mattered. Facebook now represents 95 percent of the time spent on social services and boasts nearly one in seven of the world’s population as users. Facebook’s dominance in social makes Google’s dominance in search look like child’s play. The question for 2012 is whether or not any other company with skin in the social game can matter again. While 2011 was the year Facebook unquestionably dominated social media, 2012 will be the year Facebook takes over the world. It’s an app world.

Lead Bullets Editor’s note: Ben Horowitz is a partner at Andreessen Horowitz, the former co-founder and CEO of Opsware, and a former Netscape executive. “Yet our best trained, best educated, best equipped, best prepared troops refuse to fight. As a matter of fact, it’s safe to say that they would rather switch than fight.”—Public Enemy, Fight the Power Early in my tenure as product manager for the web servers at Netscape, we faced a terrible crisis. We just got our hands on Microsoft’s new web server, Internet Information Server (IIS), and benchmarked against our product. I immediately went to work trying to move the playing field and pivot the server product line to something that we could sell for money. As I excitedly reviewed the plan with my engineering counterpart, Bill Turpin, he looked at me as though I was a little kid who had much to learn. As a result of Bill’s words, we focused our engineering team on fixing the performance issues while working the other things in the background.

How Many Hours Should a Startup Employee Work? Every so often I get drawn into the debate about startup employees and how much they should work. Should you hire workaholics? Is it expected that startup employees work 100+ hours per week? Should they be online all the time, constantly available and ready to go? It depends. But it got me thinking… One of the big problems I’m seeing with a startup’s expectations for “hours worked” is that they use it as a metric of employee quality and success. We need to think about other measurable indicators of an employee’s quality and value. I’m not arguing against a startup’s need to move insanely fast. image courtesy of shutterstock

How I Quickly Test and Validate Startup Ideas – Startup Bound Friday, Oct 28th 2011 at 6:04 am — Since I’ve technically been unemployed now for a week, I’ve spent most of that time brainstorming some new ideas and putting them into a Google Spreadsheet. This week I began going through that list and pulling out the ones I think have a chance and I narrowed a pretty large list down to just a few. Let’s take one of the examples from my list. It doesn’t have a name, so let’s just call it Patient Connect. The idea behind Patient Connect is that it integrates with any type of scheduling and patient management software any private medical practice or clinic uses to setup appointments for patients. The vast majority of private practices and clinics have their receptionist or anyone with some downtime call patients with upcoming appointments to give them a friendly reminder. If a patient doesn’t show for an appointment without advanced warning, that is lost time that could have been billed. First step is to create a good landing page for your campaign.

Is There A Peak Age for Entrepreneurship? Editor’s note: Adeo Ressi, is the founder of The Founder Institute and TheFunded.com In this guest post he argues against ageism when it comes to to entrepreneurs. Ressi is 39. The recent articles proclaiming that 25 is the peak age for entrepreneurship deserve a considered and factual response. Anecdotal Evidence: It does not take but one minute to look around the world and prove any thesis of a peak tech founder age incorrect. A commonly held belief is that younger founders appear to inspire waves of innovation, like in the mid-1990s and even today with Facebook, while older entrepreneurs launch sustainable businesses. Anecdotal data is at best inconclusive. In some cases, older entrepreneurs paired up with the younger founders, like Google (Larry Page and Sergey Brin were both age 25 in 1998, and Eric Schmidt was age 46 in 2001). Anecdotal evidence, personal stories, and biased sample sets are not the best way to draw meaningful conclusions, so let’s look at some facts. Factual Data:

My dad taught me cashflow with a soda machine After a brief, failed experiment paying me to do chores, my dad tried something really neat. It clearly took a bit of legwork, but maybe there are some transferrable lessons for parents who want to lay an entrepreneurial foundation. He gave me a vending machine. He rented the machine, found a location in a local workshop, and installed it. That this would be the last time I was given allowance.And that if I wanted to have any pocketmoney next week, I’d better spend this week’s on some inventory. I ran the machine for about 4 years from the time I was 7 or 8. But then the Coca-Cola runs out first and the Sunkist is half empty and nobody has bought even a single Grape Soda and should I cut my margins paying more per-unit for individual cans or do I buy full cases and find somewhere to store the extras and why am I doing algebra on the weekend!? Looking back on it, I’m certain this whole endeavour operated at a loss. That didn’t last. Pricing, cashflow, operating costs, and capital expenditure

Ten things top entrepreneurs do differently Often, entrepreneurs are characterized as the “rock stars” of the business world. This romantic vision is appealing but, like most stereotypes, a far cry from reality. So, what makes a good entrepreneur great? There’s no entrepreneurship gene. But a new Ernst & Young survey shows leading entrepreneurs do share common traits, beliefs and approaches that empower them to drive innovation – and economies – around the world. 1. Fifty-eight per cent of entrepreneurs we surveyed have “transitioned” to entrepreneurship, and one-third say their experience as an employee enabled them to build a successful enterprise of their own. 2. More than three-quarters of Canadian respondents are mentoring other entrepreneurs in some form. 3. Accessing funding is the top challenge facing entrepreneurs today, and a real stumbling block to startup success. 4. 5. All founders of growing companies face a central decision: do they desire wealth or hands-on involvement? 6. 7. 8. 9. 10.

Product Marketing for Pirates: AARRR! (aka Startup Metrics for Internet Marketing & Product Management Here is a brief powerpoint deck on startup metrics from a talk i gave at Supernova called "Product Marketing for Pirates: AARRR!". It's about how to develop a model of your customer behavior, and then use conversion metrics / web analytics to assist your internet marketing & product management efforts. The basic concept is based on 5 types of measurements of user behavior: A: Acquisition - where / what channels do users come from? (... otherwise known as "AARRR!" i'll post more on this later -- for now, here are a few pretty pictures: ps - National Talk Like a Pirate Day is September 19...

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