Growth Vs. Profitability: The Dilemma

2018-11-10T09:37:20+00:00Startup Resources|

One of the major goals of business is to generate profits because it fuels growth and a company requires both profit and growth to succeed in the market.

In recent times, the growth versus profitability dilemma has left the new gen entrepreneurs baffled and clueless. It is near impossible to find a middle ground between these two. The ideal case is to grow exponentially and make humongous profits but startups are driven more by valuations. The market or industry you choose determines whether you should focus more on profitability or growth.

Companies like Amazon or Uber operate in a niche where winner takes it all in their respective sector. In such cases, focusing on growth gives you a larger market share and also keeps your competition at bay but enormous amount of focus on growth can drive a startup into the ground.

Profits are usually the only way to fuel growth for bootstrapped companies. These profits are reinvested back to assist growth. Then again expanding your market share by growing/scaling fast will also lead to a great bottom line. Startups should always look to grow, by keep their baseline profits healthy. While external funds generally call for a focus on extreme growth, profitability is equally important to keep the ship floating and row it towards self-sustainability.

To focus on profit or growth is like a typical chicken and egg problem. It is absolutely essential for startups to develop a strong strategy that allows them to grow and also keep their profit line reasonably healthy because being a small part of larger pie is more rewarding than being a big part of a smaller pie.

What do you choose for your company? Growth or Profitability?

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