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> when the company isn't doing well and investors are scattering to safety and liquidity is nowhere to be found a higher margin gives your company a buffer when
by mbesto 8y ago
> when the company isn't doing well and investors are scattering to safety and liquidity is nowhere to be found a higher margin gives your company a buffer when you have to cut
And how has that worked out for 440 companies that used to be in the F500 that no longer are there?
> In a downturn, a slight decrease in margins across the board will push a company on the razor's edge from profitability to unprofitability.
Except the reason their margins are so low is because they keep feeding capital into the business to fund new projects.
> Of course when revenues are growing like crazy and the economy is gangbusters it sounds great to cut margins for absolute growth but that's a booming economy. Things are very different in a downturn.
Yup, you're right, things are very different in a downturn. Great listen about how NetSuite navigated downturns: https://a16z.com/2015/05/15/a16z-podcast-why-saas-revenue-is-worth-more-than-traditional-software-sales/ https://a16z.com/2015/05/15/a16z-podcast-why-saas-revenue-is...
- kevin_thibedeau 8y ago> And how has that worked out for 440 companies that used to be in the F500 that no longer are there? Most of them were raped by their corporate officers.
- ethbro 8y agoThis seems like a dilemma between a superior strategy, but only if executed with discipline. In reality the majority of businesses which run on large margins get lazy, allocate capital ineffectively, and underinvest in R&D. Thin margins force you be lean. Thick margins afford you the opportunity (and risk) not to be.