5 ms·
Expansion costs money, running operations is cheaper. So when growth stops, profit happens almost by default. Simple math. Suppose opening a city costs $10 (on
by yummyfajitas 11y ago
Expansion costs money, running operations is cheaper. So when growth stops, profit happens almost by default.
Simple math. Suppose opening a city costs $10 (once) and returns $1/year in revenue.
Year 1: Open 1 city, loss = $10.
Year 2: Open 3 cities, loss = $29 (spending $30 on new cities, gaining $1 from year 1's city).
Year 3: Open 9 cities, loss = $86.
Year 4: expansion stops, profit = $13.
- forgetsusername 11y ago>So when growth stops, profit happens almost by default. That's a pretty bubblicious thing to say. Your model depends on the nature of the costs. Expansion costs aren't 100% and operational costs aren't 0%. I realize it was just a quick example, but profit will depend on how their costs are actually distributed. Certainly not automatic.
- yummyfajitas 11y agoYes, I merely meant to illustrate how a business can become profitable simply by stopping expansion. I didn't mean to imply that this 3 second toy model proves it always will, though I guess my phrasing wasn't clear.
- angersock 11y agoYour math suggests that it will take at least 9 years to be profitable again.
- curiousjorge 11y agoSo when growth stops, profit happens almost by said nobody ever