We love to celebrate the mega success stories of the companies that grow as fast as humanly possible on investor capital, then sell for fantastic sums of money. The “huge risks lead to huge rewards” narrative cycle is great stuff and makes compelling fodder for inspiring new waves of entrepreneurs.
These companies function on a set of “win big, lose big” business priorities that work well for the tiny percent of startups who make it through their funding rounds. But for the vast majority of business owners, the biggest opportunity for cash isn’t in flipping a company – it’s in founding a company that’s focused on a set of values I call the “Never Lose a Dollar” priorities. A company that’s focused on profits from day one.
Profit is often seen as a dirty word, especially when it comes to startup founders. If you have profit, it means you’re not reinvesting every penny back into the business to promote growth. It might even mean you’re starting another dirty word: a lifestyle company.
When I started Etumos, I knew that instead of trying to win the lottery, I wanted to create a company that would be profitable – and sustainable – from day one. The result is a business that has fantastic margins, no employee turnover, and impressive growth. That’s because when you focus on profits now rather than a big cash-out later, your priorities shift.
The advice to “run a company by profit” may not sound like a groundbreaking insight, but reprioritizing the foundations of your business can influence every other aspect of your company. After all, they don’t call profit “the bottom line" for nothing.
Profit needs a sustainable business model
When your focus is on the amount of profit your company is bringing in, rather than the “grow your company as quickly as possible and cash out” route, you end up choosing a business model that’s naturally sustainable.
So many startups burn through their runway and so many founders and their employees work themselves to the bone, all for the promise of a big cash-out at the end. But asking yourself how you are going to survive from day one leads to a business model that is sustainable in the long term – both in terms of paying for itself and providing work-life balance.
It also makes your business significantly more risk-averse. It means you won’t miss as many things. You’ll take things slower, make fewer false steps, and grow more thoughtfully.
Profit requires you to maximize margins
Companies that focus on profit look for ways to decrease costs at every step, not as a reaction, but because that’s the way they do business. They look for ways to get the largest unit profitability on everything that they sell, then look for ways to scale.
I joke that I’m the Chief Optimizer at Etumos. One of my most important jobs is to go through the company with a magnifying glass and find opportunities to decrease costs, increase renewal likelihood and upsell potential of clients, and evaluate which investments will give the greatest returns for me and the company. Because profit has been our goal from day one, we’ve made decisions that have resulted in incredible margins – giving us the flexibility and breathing room to grow our company even more.
Profit forces you to trim the fat
Focusing on profit means looking for ways technology and outsourcing can reduce your overhead. You’ll make smarter decisions about whether to hire a full-time payroll person or outsource payroll to a company. It might be simple to hire a full-time person for around $35k a year when you have money to burn, but when you’re focused on profit, outsourcing that to a payroll company for about $2,500 a year is a smart choice.
Trimming the fat also informed our decision to be a 100% remote company. That has allowed us to attract and retain some incredible talent who can live wherever they want (or move with their partners without having to quit Etumos). It also means that our monthly overhead is as minimal as possible.
Profit allows you to invest in what matters
In fact, our only significant overhead is what we pay our people. And because we’ve spent so much effort reducing expenses in other areas, we have the financial bandwidth to pay them well.
In my experience, the average duration of a marketing employee in a Silicon Valley company is about one and a half years. As a services company, we simply can’t afford that kind of turnover and still keep our clients happy. Our biggest value and differentiator is the humans that we have on a team, which means that’s where our biggest investment needs to be.
Along with paying our employees well and allowing them the flexibility to work from anywhere, investing in our team means Etumos needs to expand with our employees and create new opportunities for them to grow. We need to be hardcore about work-life balance, and we need to give them opportunities to further in themselves and their careers.
And we can do all that because we’re so fully focused on profit.
When you run your business by “Never Lose a Dollar” priorities, you’ll create a sustainable business by design. It’ll be lean where it needs to be lean, allowing you to invest your savings in the areas that really matter for your business. And with the best people on your team and the financial flexibility that comes from high margins and cash in your pocket, the sky’s the limit.
