5 ms·

bubble or not, I can't help point out that it's profit not revenue that is important - it is the easiest thing in the world to make loss making sales.

tybris 16y ago
Unless you give dividends, profit is mostly just money you forgot to invest in your business. A successful business is about sustained growth with a balanced budget.
- helmut_hed 16y ago
  In accounting terms, an "investment", at the time you make it, does not change your profitability. This is because you are assumed to have received in return an asset of equal value. For example, the purchase of equipment results in a decrease of your cash balance, but an increase in your fixed assets of the same amount. An "expense", on the other hand, does reduce your profitability. So profits are not a sign of a lack of investment, but of revenue that exceeds your expenses, which seems pretty desirable to me.
  - Bricejm 16y ago
    Accounting: Assets = Liabilities + Capital. This deals with the Balance Sheet. Expenses/Revenues are reported on the Income Statement. Two completely different things. An income statement basically explains how well you're using the items on your balance sheet.
JimboOmega 16y ago
There is some value to revenue though; it represents traction in generating money. It's a step on the road. It's past idea, and getting customers. It's not profit, yet, but it's something. A lack of revenue means nobody is paying for your service or products, period, which is very troubling. In the first big bubble, there were a lot of companies that sold at huge valuations while having no or negligible revenue. It's one thing to be in the process of monetizing, another to have your monetization plan as "advertising(?)" From my point of view, you get an idea first, customers second, revenues third, and profits fourth. Only once you have profits is your business really successful. To command large valuations without even generating revenue... that seems crazy to me. Because you haven't proved that anybody will pay for what you're selling. If you have revenue, but not profit, that means people will pay (either for advertising or the software)... which is a very promising start. All you "need to do" from there is increase their number... at least with software, where making more is essentially free.
rokhayakebe 16y ago
But you will never have profit without revenue, unless you call an acquisition revenue.

tybris 16y ago

Unless you give dividends, profit is mostly just money you forgot to invest in your business. A successful business is about sustained growth with a balanced budget.

helmut_hed 16y ago
In accounting terms, an "investment", at the time you make it, does not change your profitability. This is because you are assumed to have received in return an asset of equal value. For example, the purchase of equipment results in a decrease of your cash balance, but an increase in your fixed assets of the same amount. An "expense", on the other hand, does reduce your profitability. So profits are not a sign of a lack of investment, but of revenue that exceeds your expenses, which seems pretty desirable to me.
- Bricejm 16y ago
  Accounting: Assets = Liabilities + Capital. This deals with the Balance Sheet. Expenses/Revenues are reported on the Income Statement. Two completely different things. An income statement basically explains how well you're using the items on your balance sheet.

JimboOmega 16y ago

There is some value to revenue though; it represents traction in generating money. It's a step on the road. It's past idea, and getting customers. It's not profit, yet, but it's something. A lack of revenue means nobody is paying for your service or products, period, which is very troubling. In the first big bubble, there were a lot of companies that sold at huge valuations while having no or negligible revenue. It's one thing to be in the process of monetizing, another to have your monetization plan as "advertising(?)" From my point of view, you get an idea first, customers second, revenues third, and profits fourth. Only once you have profits is your business really successful. To command large valuations without even generating revenue... that seems crazy to me. Because you haven't proved that anybody will pay for what you're selling. If you have revenue, but not profit, that means people will pay (either for advertising or the software)... which is a very promising start. All you "need to do" from there is increase their number... at least with software, where making more is essentially free.

rokhayakebe 16y ago

But you will never have profit without revenue, unless you call an acquisition revenue.