Our customers are the only investors we've ever had
We've had investors since day one, even though they've never asked for shares. They're our customers. And seeing it that way changes how you look at everyday work.
Leer más →Profitable businesses: what the ones that last have in common
There's no list of profitable businesses that works for everyone. But the ones that last look a lot alike, and almost never because of their industry.
Search for "profitable businesses" and you'll get lists.
Dog grooming. Franchises. Online shops. Whatever's trendy this year.
The problem with those lists is that they talk about industries. And profitability almost never depends on the industry.
It depends on how the business is put together.
What profitable businesses have in common
1. They solve a problem that comes back
A problem that shows up once gives you a sale. A problem that comes back every month gives you a business.
Clubs have to collect fees every season. Guesthouses get bookings every week. Restaurants open every day. That's what makes a product for them pay its way month after month.
2. Their customers come back
Getting a customer is expensive. Keeping one costs much less.
Profitable businesses don't live on endless acquisition. They live on the people who come in staying.
3. They have healthy margins
Selling a lot at a thin margin is running to stay in the same place.
A profitable business charges what its work is worth. Not what the cheapest competitor charges.
4. Their fixed costs are low
The less you need to bring in to cover your costs, the more freedom you have to decide.
That isn't stinginess. It's being able to turn down a client who doesn't fit without the month's numbers shaking.
5. They don't depend on one person
Nor on one client. Nor one channel. Nor the owner working fourteen-hour days.
A profitable business isn't the one with the biggest turnover. It's the one that lets you sleep best.
Profitable businesses with little investment
The businesses that need the least investment are the ones that sell knowledge or time: services, consulting, development, training.
They don't scale on their own. But they give you something very valuable: revenue from month one and a front-row seat to see which problems keep repeating.
And from there, if you want, a product can grow.
How to tell if your idea can be profitable
- Will the customer have the problem again next month?
- What does it cost to get a customer, and how much do they leave you in a year?
- What's the minimum you need to bill so you don't lose money?
- Can you charge a fair price, or only compete on price?
If you like all four answers, the industry barely matters.
Boring is usually profitable
The most profitable businesses I know never make the press.
They're boring on the outside and tidy on the inside. They solve something specific for specific people, charge a fair price and look after whoever stays.
No fireworks. Lots of patience.
P.S. On why small and profitable isn't a consolation prize: ambition doesn't have to mean size.