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Heya, I found this comment deeply insightful, thank you. Could I ask you to please unpack this line a bit more: > If sales is the thing that drives profit Wh

Heya, I found this comment deeply insightful, thank you. Could I ask you to please unpack this line a bit more: > If sales is the thing that drives profit What else could drive profit, if not sales? > the company's value is tied to the intellectual property In the case where unique IP is the core value proposition (the strategic "moat" if you will), isn't sales still what drives profit? Put another way, I love what your comment implies, and so I'm trying to imagine a business that generates good profit that doesn't rely on sales as much, but I'm struggling. Thanks! ^_^

CSMastermind 4y ago
I think that the majority of companies have differentiators that aren't sales. First consider any company that's selling a commodity. Exxon's oil is the same as everyone else. I'm sure they might have sales in some capacity but they don't really need to convince someone on the fence to buy oil and they don't get a lot of value out of a slightly better negotiated price for their oil since again, if they try to charge more than someone else that customer will just go buy someone else's oil. So Exxon is generally speaking run by engineers because better more efficient engineering is the main way the company can derive more value than they do now. Now consider Coca Cola. For the most part Pepsi is just as good as Coke. Maybe you're really picky about one vs the other but truth be told most people don't care and the market is wide open for someone else to make a similar soda. So what is their "moat"? Their brand, maybe you could say their supply chains, which are world class. So Coca Cola isn't run by sales people but it is run by marketing and operations people because that's what drives their continued profit. What about Walmart? Again I'm sure Walmart does have salespeople working for them in some capacity but I'd say Walmart's main value driver is their ability to curate and acquire inventory. And sure enough at Walmart (and other retail stores) it's the Merchandisers and Buyers that have all the real power. It's not the "sales associates" running Walmart. Among the Fortune 500 you find very few companies run by salespeople.
nine_k 4y ago
Say, governmental contracts can be very different from commercial sales. Venture capital-backed companies used to often not care about operational profits, but about growth and market penetration, and the repay event was the moment when a large incumbent decided to buy the challenger startup. They do so to either add to their portfolio and acquire technology and talent, or even to quash the competitor which distracts their user base. Nevertheless, it's might be profitable to be bought and disbanded. I suspect that sometimes profit is not even a motive (non-profit orgs, etc).
- herodoturtle 4y ago
  Thanks, this was very useful! I imagine government contract suppliers, VC-funded startups, and Non-profit orgs - together - make up a decent chunk of all software companies. I'm curious what you'd say about all the remaining software companies, namely the ones operating in a "traditional" sense (I can't think of a better word, but I suspect you know what I mean... your typical B2C or B2B for-profit bootstrapped business). Is the latter group of companies' profit driven by sales and sales alone? Or is there something else that a business owner could focus on to drive profit? As you can tell I'm still trying to unpack the OP's point above ^_^

CSMastermind 4y ago

I think that the majority of companies have differentiators that aren't sales. First consider any company that's selling a commodity. Exxon's oil is the same as everyone else. I'm sure they might have sales in some capacity but they don't really need to convince someone on the fence to buy oil and they don't get a lot of value out of a slightly better negotiated price for their oil since again, if they try to charge more than someone else that customer will just go buy someone else's oil. So Exxon is generally speaking run by engineers because better more efficient engineering is the main way the company can derive more value than they do now. Now consider Coca Cola. For the most part Pepsi is just as good as Coke. Maybe you're really picky about one vs the other but truth be told most people don't care and the market is wide open for someone else to make a similar soda. So what is their "moat"? Their brand, maybe you could say their supply chains, which are world class. So Coca Cola isn't run by sales people but it is run by marketing and operations people because that's what drives their continued profit. What about Walmart? Again I'm sure Walmart does have salespeople working for them in some capacity but I'd say Walmart's main value driver is their ability to curate and acquire inventory. And sure enough at Walmart (and other retail stores) it's the Merchandisers and Buyers that have all the real power. It's not the "sales associates" running Walmart. Among the Fortune 500 you find very few companies run by salespeople.

nine_k 4y ago

Say, governmental contracts can be very different from commercial sales. Venture capital-backed companies used to often not care about operational profits, but about growth and market penetration, and the repay event was the moment when a large incumbent decided to buy the challenger startup. They do so to either add to their portfolio and acquire technology and talent, or even to quash the competitor which distracts their user base. Nevertheless, it's might be profitable to be bought and disbanded. I suspect that sometimes profit is not even a motive (non-profit orgs, etc).

herodoturtle 4y ago
Thanks, this was very useful! I imagine government contract suppliers, VC-funded startups, and Non-profit orgs - together - make up a decent chunk of all software companies. I'm curious what you'd say about all the remaining software companies, namely the ones operating in a "traditional" sense (I can't think of a better word, but I suspect you know what I mean... your typical B2C or B2B for-profit bootstrapped business). Is the latter group of companies' profit driven by sales and sales alone? Or is there something else that a business owner could focus on to drive profit? As you can tell I'm still trying to unpack the OP's point above ^_^