HBR 2011 profitability map

Leadership (Buzzword Alert Program initiated) when prefixed with startup is a recent found fad and when suffixed with sutra makes it one of those Management Theories – which we preach day-in and out- just everywhere possible. Luckily, I am no expert on leadership or management theories; I am just a humble, pathetic and cranking doer kind-of-guy.

This blog is certainly not giving you a copy of Sail to Glory but talking about something very basic which we miss while we start scaling our teams in our dear Startups. Yes, this blog is expected to be little biased around my experiences so far; but certainly helpful in creating a chain of thoughts. I would welcome any form of criticism, coffee, and opinion.

The most important element more than code, design, architecture, distribution, packaging for a business or a product is making Profit. We all are, certainly and almost, always focused towards making Profits. However, at our Startups, this just gets more important. Drudgery and donkeywork isn’t always a key to profit making. Each activity that we do is questioned as “Why?” and obviously most of time we just have good feel about that “Why?”. Do you think “Ask Why” is a panacea to Profits? May be or may be not?


Profit is like hitting the gym everyday and then feeling great after a workout. Burning yourself is inevitable, but those important startup calories need to be burned to contribute to your customer helping them make a better profit. As our glorified overused term of startup-culture, we talk about our work environment, people, doing some fun stuff together but we miss to talk about Profits quite often. Profits really need to be understood by everyone and not only as a number but also a raison d’etre for the business which we are co-building.

Profit isn’t a weapon for someone doing Sales, Marketing or Blessed ones interacting with client’s team; but, a mandatory thought process and associated activity for everyone. It’s *really* not so hard.

When was the last time you discussed about Profits with your peer and superior?

Profitability is another important “P” (ee) that gets a miss. What is this Profitability after all? Investopedia, Google have dedicated results for this very topic. For Startup world, advise on Startups’ focus on Profitability can be read at Mark Suster’s (Follow him) blog : Should Startup Focus on Profitability or Not?

For People who doesn’t like to click on links and read awesome stuff, here is the most important part of his blog reproduced here:

Being profitable allows you degrees of freedom you don’t have when you rely upon other people’s money.

  • You may have leverage when you DO need to fund raise. (There are many investors who are not looking to build enormous businesses who value the fact that you can run a business profitably)

  • It allows you many more exit opportunities. While Google and Facebook will buy “acquihires” (at least as of Dec 2011), many acquirers hate the idea of buying companies that aren’t profitable. When they look at buying your company they often think in terms of “how long will it take until I earn back the profits to pay for my acquisition price?” If you’re not profitable you’re purely a cost center to them.

  • Being profitable certainly makes your company more sustainable in difficult times.

Most of us in the business at times don’t even have guts to find out “How?” are we keeping-up with Profitability (Thanks to Urgent looking activities in resource crunched Startups). At the first place, is it really meaningful to do all that Maths? I would rather invest my time doing something more meaningful activities such as writing a code, or considering launching a new revenue centric service or just spamming my friends and fans on my facebook page?

It is very important at Startups to think, talk and share your own versions and understanding of Profitablity. This is not one of those “Don’t try this at Home – Television Tropes” and feel free to try out various approaches which help you out do the similar type of work in lesser time every next time. For normal people like me who are bad with Theories, Terms and Maths – profitability is just about creating value in whatever you do.

Your “Why?” would answer the important one and “How?” would give you an actual working sense. To accomplish the puzzle you would need “What?” and Profit Share is just the square peg.

Profit Sharing

Profit Sharing is the most common negotiation term used in Startup World. Be in Hiring an External Consultant, Rock star Developers, Heavy Weight Sales Guys or Baggage CXOs – Profit Sharing is a Golden Biscuits thrown to everyone to attract. One common observation which I had around Sharing Profits is – it isn’t as easy to execute as it sounds. Profit starved Startups mostly running on Credit Card model has already huge commitments of money which would flow as profits. These monies need to be re-invested back into the company. Therefore, making things increasingly difficult with Startups to *actually* share their Profits. On your next hire, be careful with profit sharing and rather share profits if committed. Make Profit sharing your culture statement and build that into your planning and execution. This helps not just attract but retain people for your upcoming Enterprise.

Profit Sharing if managed and planned well could be huge motivation for the team who works with high degree of uncertainty in startups in this already uncertain economy.

Please do write to us on contact@366Pi.com  or leave a comment below and let us know your thoughts on Profit, Profitability and Profit Sharing?