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

Published by Tony Tam

Senior Engineer Manager, Engineering Productivity @ Splunk, &