The Corporate Law Group

Should I Worry About Revenue?

You are starting that online cinder block retailer that you have always dreamed about but you aren’t sure if you should worry about revenue or not. While the most important thing to private equity is growth, and worthy of your focus, revenue should be a close second. Sure, if you attract a million eyeballs (to use 1990’s dot-com boom vernacular) you can probably sell some ad space, but if you sell cinder blocks you can stay alive for sure.

We know, revenue is not very sexy. Profits even less so. But at some point you need to bank some money from a customer or user, or you will always be fundraising. In a free market revenue is the feedback that someone else finds what you are doing useful. They find more value in your products or service than in the money they are willingly to part with to get it.

In one sense, revenue is proof that you aren’t wasting your time and the resources you are spending in pursuit of your business. If no one is willing to help monetize your business you are wasting your time and your investors’ money. Entrepreneur George Gluck says, “It depends on the stage you are in, but at some point you need revenue. That’s my mantra.”

We aren’t saying that revenue needs to be your sole focus. If you are building a nuclear power plant or a field of solar panels, you have a lot of work to do before you are at the point where you can offer your service to a customer. Same with a new bus manufacturer or airline. But the goal has to include someone paying you at some point.

Profits are a different thing. They are important too. Henry Ford said that, “Profit is the reward for making a contribution.” But profit has almost as much to do with controlling expenses as it does with attracting customers. Profit is important, but can come later.

Without revenue you have little feedback. With growth and adoption, even without revenue, you have a sense that you are not wasting resources. But only because you know that you can sell ad space. If you attract a bunch of people, especially if focused on a narrow area, such as bluegrass fans, there are folks who want to sell them banjos, and you can monetize that.

Ultimately revenue is FU money. If you have it coming in you can keep going. Keep striving. Keep working on changing the world. Without, all you can do is keep fundraising.