The Weird Freedom of Chasing Profits over Growth for a Change
COVID has brought much darkness, fear, and uncertainty into our lives. But one of the silver linings for me as an entrepreneur is that it’s become acceptable to aspire to being a profitable company.
I know, revolutionary! Controversial! But in the theology of VC-fueled entrepreneurship, we are taught to bow down before the altar of growth above all else. Sure, somewhere in each deck there’s a slide on unit economics, but those unit economics are rarely the present-day numbers and nearly always framed as a hypothetical, what might be achieved at scale, someday. Investors do ask, but there’s usually much more focus on total addressable market (the TAM better be in the billions) and growth (it better be hockey stick) than actually making good old fashioned profits.
I’ve always been uncomfortable with this, and I started to wrestle with this even before COVID struck — check out this piece on business people vs. entrepreneurs. Maybe it’s my upbringing: my father ran a business, a solo dental practice with two offices in Western NY. (Specifically a periodontist; I’d probably get in trouble if I failed to specify!) He didn’t have any other dentist partners; he wasn’t part of one of those mega-practices. At any time he employed about 5–6 people. The TAM of the periodontal market in Lockport NY is small (population 20,000), but my father ran that practice with a focus on people and the value of relationships, on the paramount importance of doing great work and taking pride in excellence, and on making sure that the expenses flowing out were always less than the revenues flowing in. Every night after dinner, he would call each patient from the day, just to make sure they were feeling okay and didn’t have any questions they’d forgotten to ask. Hard to make time for that if you’re focused on growing 20% every month!
Would a VC ever have been interested in that business? No, and nor should she be given the risk/return equation that rationalizes the VC fund model. But my dad’s business generated more than enough money for us to live a great life (thank you parents!!) and created a legacy of community relationships and respect for work well done.
The times may be changing in Startup Land. Now, COVID has shifted the VC “blitzscale!” chorus to cautionary tales of conservation and cost-cutting, because in the words of the Stark family, “Winter is coming.”
There’s no way around it, these are scary times and our business is being challenged in ways we’ve never been since my company Shortlist’s launch in 2015. But at the same time, I’m experiencing a certain excitement about the challenge of pushing for profitability rather than just growth. The chance to do more with less. A feeling of liberation in chasing an achievable goal (profits, positive unit economics) rather than a low-odds, high risk, life-sucking target (unicorn status, deca-unicorn status, world domination).
COVID, strangely enough, is giving companies like ours the permission and the space to reset our sights on a different version of success. No one expects us to grow at 200% this year; “flat” is the new hockey stick. And everyone wants to see that companies have the ability to pull levers to conserve cash and even make money if they have to. Hallelujah!
This does not mean we don’t still have big ambitions. We’re more excited about Shortlist’s mission to unlock professional potential than ever — and it’s a big mission that I expect I’ll be engaged in for the rest of my career, in one way or another. But it means that as we build towards that, we can do it on a foundation of great people, quality work, strong relationships, and a thoughtful approach to our craft of matching talent to opportunity. We can take the time to listen to customers and candidates, to make sure the building blocks fit, to experiment with open-minded curiosity rather than growth-crazed desperation as we find our best self.
So, this time is impossibly challenging, on so many levels. The human costs of this pandemic are staggering. But I am also looking for slivers of sunlight to keep me hopeful, and a startup world that considers profitability cool again would count, for me, as exactly that.