Building a Profitable Business Will Radically Change Your Objectives

“What do you think I should be focusing on?” she asked.

“I think you should focus on building your business,” I said.

I know this seems obvious, but in the startup world these days, it isn’t obvious. There seems to be a straight line mentality which connects startups with funding. It’s a three step process.

  1. Declare yourself an entrepreneur
  2. Create a presentation deck on your idea
  3. Raise money

How Goals Impact Perspective

I was very impressed with this entrepreneur. She had a great education combined with terrific work experience. Plus, she was a high achiever in both environments.

I said, “What you see happening at incubators around town is not real. It is easy to get caught up in the romance and intellectual process of entrepreneuring. These are artificial environments which run on pure idealism. Eventually, the entrepreneur gets it. They need to build value, not talk about value.

“You need to focus on building your business. This means thinking like small business people in India. Their goal is to make money so they can support their families. Do this, and you will build a company people will want to invest in,” I explained.

If you want to build a unicorn based on current best practices, don’t follow this advice. But if you want to build a business you’ll enjoy, that will be valuable to a buyer one day and that will provide for your family, then absolutely do it.

Phil Knight’s Path to Success

The single goal of the startup used to be to make money. In Phil Knight’s book Shoe Dog: A Memoir by the Creator of Nike, he tells the story of a shareholder meeting. There were 30 initial shareholders, and combined they had invested $250k. They would be called angel investors today.

He delivered the bad news, “We lost money this quarter.” This was the first time the company had lost money since its founding.

He said, “Thirty hands went up.” He called on the first investor who said he was terribly disappointed. Phil explained the unusual supplier situation which impacted sales. Then asked, “Are there any other questions?”

Twenty-nine hands went up.

Three Things You Won’t Need

All these investors were expecting a business which made a profit every quarter. This included Phil Knight. He had to feed his wife and kids so he figured out a way for the business to make money right from the start.

If building a profitable business is your goal, you will make all the right decisions.

No need for customer discovery.

No need for a great startup network.

No need for a pitch deck for raising money.

Your Single-Purpose Objective

Focus all your efforts on selling what you have to the people who will buy it. That’s it. Nothing more. Keep that foremost in mind, and eventually, success will be yours.

By the way, not only did Phil Knight build a consistently profitable company, he achieved billionaire status while doing it.

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6 thoughts on “Building a Profitable Business Will Radically Change Your Objectives

  1. Charlie, you have identified what too many entrepreneurs seem to forget: Their goal is to build a business, not to raise money. As an investor it is important to me that the entrepreneur understands that and that he or she has a plan to achieve it. A pre-revenue business is far less attractive than one that has real customers and a path toward generating more revenue and — ultimately — profit. At the end of the day we do not invest in good ideas; we invest in good businesses, and even though they are early stage they must still be real businesses.

  2. A great post, and on the mark.

    A minor quibble: you *do* need to know who the customer is, in order to (as you put it) sell “what you have to the people who will buy it.” That identification is what customer discovery actually is all about, and the on-going maintenance of that knowledge (who the customer is, and what the customer wants) is necessary if the business is to remain profitable.

    • Keith, You know I agree with you. You do need to know your customer. However, I find the people who are strapped for cash somehow get to the right customer quickly. Because making money is a required constraint, they are a lot less likely to intellectualize the exercise and argue about it. They find the customer or the business dies quickly. Thanks for making time and the great comment.