In this article, I plan to pick up where I’d left off in the series on Building a Business. As you may have guessed from the title we will be exploring the importance of generating revenue and why it should be the fundamental goal for the vast majority of businesses. This may seem obvious, but so many entrepreneurs lose sight of the revenue in the quest for building a better widget.
Revenue is the first part of the profit equation:
Profit = Revenue less Expenses
Many people look on this equation as being obvious without really understanding it in the context of a startup business. For a startup, the equation is all about runway. The less negative the profit is (ie. small the losses) the longer it will take a new business to run out of cash.
You can achieve this by hamstringing the business on the development side by reducing the expenses. This strategy often defeats the purpose of raising capital or being the first to market in a land grab. If you’re initially committed to your expense line, then the only other option is to generate revenue....