Reinvest Profits For Growth

Noah Kagan shares AppSumo's profit reinvestment strategy, which follows Amazon's approach of maintaining minimal profit margins by strategically reinvesting earnings back into the business for growth.

Key Points:

• Financial Overview:

  • Net Revenue: $56M
  • Gross Sales: $76.7M
  • Profit: $7.5M

• Reinvestment Strategy:

  • Maintain approximately 0.5% net income margin over 14 years
  • Focus on spending profits in Q4
  • Strategic reinvestment areas:
    • Team trips to Mexico
    • Advertising
    • Server infrastructure
    • Sponsorships
    • New hires
    • Tax-compliant prepayments
    • Team distributions

• Distribution Structure:

  • Primary focus on team distributions
  • Remaining profits split between founder and partner

• Goal:

  • Reinvest profits to ensure each subsequent year becomes bigger
  • Follow Amazon's model of prioritizing growth over profit margins