Tech Businesses That Are Unprofitable Need To Ask The Hard Questions

A sashimi plate from I Privé

Even though I work in high tech, I don’t really understand business that loose money during their entire existence.  How can that be a business?   I invest in a restaurant that is luckily profitable after 1 year.   We offer a product people value and are willing to pay for.  We have investors who want to see a return on their money in a few years and not wait for a IPO or buyout opportunity that may or may not come.

I understand that initially a company have to heavily invest in order to build up the customer base, but after 3-4 years, isn’t it time to put a stake in the ground that you have to figure out a way to be profitable?  Or you need to think about whether you are a business or just a gamble that someone will bail you out?

If you are loosing money after 4 years, it’s time to evaluate
1) Am I hiring too many people, expending too much capital compared with the revenue I’m bringing in?

2) Is the product even worth paying for?  Is my product/ services really valued by customers?

3) Is my company really going to get the economy of scale or will the cost of doing business going to overtake any savings I will gain?

4) Is the barrier to entry for my competitors strong enough to keep them away long enough in order for my growth to continue?

I don’t believe in technology companies that do not have a 4 year horizon to profitability.  They are just kidding themselves and not asking the hard questions and making the hard decisions.

Tony Tam