The point is that not all growth is created equal. The more you pay to achieve growth, the less valuable it is, and the lower the profit that comes with the new

The point is that not all growth is created equal. The more you pay to achieve growth, the less valuable it is, and the lower the profit that comes with the new revenue from that growth, the less value it is. Bill essentially covers this in section 9: Organic Demand vs. Heavy Marketing Spend. There's a whole slew of factors that need to be taken into account here: customer acquisition cost (and how it changes - e.g. does it go down as you grow, due to network effects or virality?), the lifetime value of a customer (which should be discounted appropriately), cost structure (particularly fixed vs variable), cash flow profile (i.e. when do you actually start receiving revenue from a customer?), and working capital requirements are (e.g. are you a company with negative working capital, like Groupon?). Jason Cohen wrote a good blog post about this sort of thing in the SaaS space: http://blog.asmartbear.com/unprofitable-saas-business-model.html http://blog.asmartbear.com/unprofitable-saas-business-model....