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Why is revenue the prevailing number used for measuring a business? I see revenue cited almost universally these days, with no mention of profit. A hardware co

Why is revenue the prevailing number used for measuring a business? I see revenue cited almost universally these days, with no mention of profit. A hardware company that makes $100k in revenue (with no profit) is very different than a SaaS product that makes $100K with 90% profit. Why don't we just use profit?

NiagaraThistle 4y ago
IT's funny you mention this. There has been talk on twitter among a lot of Indie Hackers the past couple weeks (months?) saying the same thing. Especially now with a potential recession looming. I've always thought the same. But I think the reason revenue is used most often stems from VC backed businesses (and those seeking funding) trying to show that they are viable and have customers so they can raise more funds even before they have profit - think Twitter and Facebook as big examples.
jrumbut 4y ago
Profit is a tricky concept in any business, particularly a small software business. A lot of very successful businesses have zero or near zero profit (considering that paying the CEO reduces the profit, reinvesting reduces the profit, etc).
deleted 4y ago
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rco8786 4y ago
Because profit is a lie. I can have a business with $1mm in revenue, pay myself a $1mm salary and poof, $0 profit for my business. Revenue has its own issues obviously but as a quick and easy measure of how much money this business can generate its reasonably useful.
danenania 4y ago
If you make 100k but reinvest half in marketing, your profit is 50k, but it would be misleading to equate your business to another one that makes 50k and doesn't reinvest any of it. What you're looking for is gross margin, but even that is hard to pin down exactly since there can be a fuzzy line between whether an expense is required or discretionary.
jon_adler 4y ago
As the saying goes “Revenue is Vanity. Profit is Sanity. Cash is Reality”.
lancesells 4y ago
I know I'm in the minority here because these articles seem to pop up quite often but what is it with Indie Hackers and so many articles being about ARR/MRR? It's one of the least interesting things to me compared to the actual product or ideas. I get that it's mainly content marketing to talk about how much you're making but why does it work so well?
- HeyLaughingBoy 4y ago
  Because it's about the business and revenue is what's important. The product is "just" the thing you sell to get revenue. A business with $50k MRR is far more interesting than one with $5k MRR even if the 50k/month business is using 50 year-old technology while the $5k one is bleeding edge.

NiagaraThistle 4y ago

IT's funny you mention this. There has been talk on twitter among a lot of Indie Hackers the past couple weeks (months?) saying the same thing. Especially now with a potential recession looming. I've always thought the same. But I think the reason revenue is used most often stems from VC backed businesses (and those seeking funding) trying to show that they are viable and have customers so they can raise more funds even before they have profit - think Twitter and Facebook as big examples.

jrumbut 4y ago

Profit is a tricky concept in any business, particularly a small software business. A lot of very successful businesses have zero or near zero profit (considering that paying the CEO reduces the profit, reinvesting reduces the profit, etc).

deleted 4y ago

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rco8786 4y ago

Because profit is a lie. I can have a business with $1mm in revenue, pay myself a $1mm salary and poof, $0 profit for my business. Revenue has its own issues obviously but as a quick and easy measure of how much money this business can generate its reasonably useful.

danenania 4y ago

If you make 100k but reinvest half in marketing, your profit is 50k, but it would be misleading to equate your business to another one that makes 50k and doesn't reinvest any of it. What you're looking for is gross margin, but even that is hard to pin down exactly since there can be a fuzzy line between whether an expense is required or discretionary.

jon_adler 4y ago

As the saying goes “Revenue is Vanity. Profit is Sanity. Cash is Reality”.

lancesells 4y ago

I know I'm in the minority here because these articles seem to pop up quite often but what is it with Indie Hackers and so many articles being about ARR/MRR? It's one of the least interesting things to me compared to the actual product or ideas. I get that it's mainly content marketing to talk about how much you're making but why does it work so well?

HeyLaughingBoy 4y ago
Because it's about the business and revenue is what's important. The product is "just" the thing you sell to get revenue. A business with $50k MRR is far more interesting than one with $5k MRR even if the 50k/month business is using 50 year-old technology while the $5k one is bleeding edge.