Growth Before Profits

Shaan Puri and Sam Parr discuss business priorities, particularly the balance between growth, EBITDA, and cash flow. They emphasize that focusing on revenue growth first is typically the right strategy, as it's harder to grow revenue but easier to optimize for profit once scale is achieved.

Key Points:

• Order of Business Priorities:

  • Product Market Fit (pre-step)
  • Revenue Growth
  • EBITDA (Profit)
  • Cash Flow

• Growth Strategy:

  • Double revenue yearly is a good target
  • Example: $500K → $2.2M → $5M → $12M
  • Profit can be minimal during growth phase
  • Cash flow can still be strong despite low profits

• Profit vs Cash Flow Dynamics:

  • Can have $1M profit but $2M cash flow
  • Example: Annual subscriptions create immediate cash flow
  • Revenue recognition spreads over 12 months
  • Actual cash collection happens upfront

• Why Growth First:

  • "Typically it's harder to grow revenue but it's easier to once revenue has grown to become profitable"
  • Can optimize for profit after achieving scale
  • Growth requires different focus than profit optimization

• Strategic Considerations:

  • Some businesses should stay in growth mode longer
  • Relevant for winner-take-all markets
  • Important for venture-backed companies
  • Different strategy needed for privately owned businesses with no outside investors

• Trade-offs:

  • Can't effectively focus on growth, EBITDA, and cash flow simultaneously
  • "When you want 3 things equally you usually get none"
  • Need to prioritize based on business stage and goals