Short Q&A from Capitalism.com (#FFLTV Ep 18) where Ryan Daniel Moran advises that new businesses should prioritize driving sales and customer flow through advertising (even operating at a loss) during an initial build period — roughly the first 3–6 months — and only shift focus to profitability once advertising can be turned off and the business remains profitable.
Matt Bahey asks, at what point in a new business do you stop focusing solely on driving sales and switch to a focus that is more concerned with profitability?
When starting a business, one of the things that determines how fast you grow is how much you can spend on advertising. This is why I think it's wise for some businesses to go out and get capital and operate in the red until they have enough customers and and enough sales flow to be profitable. I think that is the piece and that's the transition point in which it's okay to stop focusing on top line revenue and start talking about profitability. Now some people disagree with me, but I think that you're gonna build a much more profitable business if in the first at least three to six months of the business you can step on the gas and push as much product as possible without having to worry about profitability. So you can sponsor podcasts, you can go get influen influencers as long as you are not being wasteful with your advertising dollars. I think the first three to six months should all be about awareness. Some people say even longer. So I say be willing to go through that process of losing money until you have the client flow and you have the customer flow to be able to sustain profitability by backing off the advertising dollars. Meaning if you could step turn the advertising dollars off, are you profitable? And until you're at that point, you should stay on the gas until you are able to sustain those profits.
