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Then I have a great business proposition for you! It's easy... for the past month we hung around a street corner and for everybody who paid us $1 we gave them

by lusr 14y ago

Then I have a great business proposition for you! It's easy... for the past month we hung around a street corner and for everybody who paid us $1 we gave them $1 back with a SMILE! We've done this with 10K paying customers so far! We also sold a packet of sweets worth $1 to my aunt for $2; she's always had a soft spot for me. We're profitable! :D I believe in my product so much I haven't even taken a salary, amazing huh?! And I believe with a $10 million investment we can scale this to 10 million paying customers within 1 year! Wanna invest?! [Oh and in year 2 I'm taking a $10 million salary.] I'm obviously being facetious and while I don't want to be "that guy" dismissing what appears to be a very respectable business, mentioning revenue & customer numbers without mentioning profit values or percentages irks me. This is probably because of 8 seasons of Dragon's Den and 3 seasons of Shark Tank that have impressed upon me just how few people understand that a large turnover means nothing; "turnover is vanity; profit is sanity". It's not easy to achieve a large turnover, sure, but it's also meaningless unless it is associated with a reasonable net profit. Having read through a few more comments I suspect the author's business is probably turning a decent net profit, but, nevertheless, the post seems incomplete without this data or at least some form of confirmation (e.g. "our net profit is between 10-20%").

StavrosK 14y ago
Yes, profit is the thing that impresses me even more than paying users. We're talking about investment vs users as a metric, not investment vs anything else.
- lusr 14y ago
  I don't follow? What is the meaning of "investment vs users"? Surely "# users" as a metric only makes sense within a specific business model that ultimately resolves down to a figure of "profit/user", which reinforces my point that discussing revenue, users and investment without the final part of the equation - expenses & profit - is an incomplete discussion. With any equation you can come up with huge numbers for any of the terms but if you don't reveal all the terms you cannot determine the profit - what is the value of the discussion in that case? EDIT: On HackerNews, a place for entrepreneurs and consequently the presumably financially literate, I'm being downvoted for pointing out that terms are missing from the profit & loss equation being presented, with nobody stepping up to explain why there's something wrong with my criticism?
  - mcknz 14y ago
    I didn't downvote, but I'm guessing your lengthy and sarcastic analogy was the culprit. It comes off as needlessly combative. Tone can overwhelm the message. EDIT: it only takes one or two people out of all HN users to make it look like everyone's against you, so I try not to take DVs to heart.
    - lusr 14y ago
      I appreciate your reply and your point, but my tone was intentional and I believe in this context it is well warranted. I think it's great to be excited at the potential for success, and the reason I come to HN is because it is invigorating and motivating to see the success of others, and to learn from their experiences. However we must not forget that the vast majority of small businesses fail. In the best case, that's the entrepreneur's money and time expended; hopefully on the upside some lessons were learned and the financial hit is not too bad. In the worst case, it can be the life savings of investors that may be family and friends, as well as relationships, that are lost; furthermore, bankruptcy is a distinct possibility. So, my feeling is this is extremely serious stuff that requires direct, hard-hitting commentary - not a softened message that's potentially easily dismissed. Business is combative - it's always competitive. If people are quick to ignore the realities of the most basic details of business (the profit & loss equation), and take offence when that criticism is presented, does that not seem a bit of a concern? Would you invest in somebody like that?

by lusr 14y ago

StavrosK 14y ago

Yes, profit is the thing that impresses me even more than paying users. We're talking about investment vs users as a metric, not investment vs anything else.

lusr 14y ago
I don't follow? What is the meaning of "investment vs users"? Surely "# users" as a metric only makes sense within a specific business model that ultimately resolves down to a figure of "profit/user", which reinforces my point that discussing revenue, users and investment without the final part of the equation - expenses & profit - is an incomplete discussion. With any equation you can come up with huge numbers for any of the terms but if you don't reveal all the terms you cannot determine the profit - what is the value of the discussion in that case? EDIT: On HackerNews, a place for entrepreneurs and consequently the presumably financially literate, I'm being downvoted for pointing out that terms are missing from the profit & loss equation being presented, with nobody stepping up to explain why there's something wrong with my criticism?
- mcknz 14y ago
  I didn't downvote, but I'm guessing your lengthy and sarcastic analogy was the culprit. It comes off as needlessly combative. Tone can overwhelm the message. EDIT: it only takes one or two people out of all HN users to make it look like everyone's against you, so I try not to take DVs to heart.
  - lusr 14y ago
    I appreciate your reply and your point, but my tone was intentional and I believe in this context it is well warranted. I think it's great to be excited at the potential for success, and the reason I come to HN is because it is invigorating and motivating to see the success of others, and to learn from their experiences. However we must not forget that the vast majority of small businesses fail. In the best case, that's the entrepreneur's money and time expended; hopefully on the upside some lessons were learned and the financial hit is not too bad. In the worst case, it can be the life savings of investors that may be family and friends, as well as relationships, that are lost; furthermore, bankruptcy is a distinct possibility. So, my feeling is this is extremely serious stuff that requires direct, hard-hitting commentary - not a softened message that's potentially easily dismissed. Business is combative - it's always competitive. If people are quick to ignore the realities of the most basic details of business (the profit & loss equation), and take offence when that criticism is presented, does that not seem a bit of a concern? Would you invest in somebody like that?