There's Only One Metric of Success in Business: PROFIT

Watch the first two minutes of this speech I gave at Northwestern (I’ve tagged the part of the video where I talk about it), and you’ll see how I picked the title of this article:


Jason Fried of 37Signals has once again brought down the reality check hammer, about something I keep harping about: profit.

Here’s some business 101:

Revenue – Cost = Profit.

It’s not Venture Capital + Growth = Profit, or Pageviews + Buzz = Profit. Yet in web entrepreneurship, this simple equation doesn’t always click. So Jason Fried wrote about it after an NYT article that’s more than ironic. My favorite paragraph from his article:

“If there was an airline that flew more passengers than anyone else, but lost money on each one, would we call it a success? If there was a restaurant that served more people than anyone else, but lost money on each meal served, would we call it a success? If there was a store that sold more product than anyone else, but took a loss on each one, would we call it a success? Would the business press hold these companies up as business model successes? Would anyone? Interesting, maybe. Promising, sure. But successful? Then what the hell is going on with the coverage of our industry?”

No business is a success until it has a profit. Twitter is a success as a platform, but certainly not as a business. If it can’t prove its viability, it will die just like any other high-profile business.

Tech enetrepreneurs: do yourself a favor and read the entire article, and then watch David Heinemeier Hansson’s Startup School 08 talk, which really shows you why you should care about revenue: