Its the start of 2017 forecasting season for VC-backed startups.
Any well-performing business will put grand goals forward for the next year.
Likely a triple or a double for wherever they or their VCs see them on the triple/triple/double/double/double path.
To appease their VCs, most founders will build plans that simply back into an end of year metric that meets these goals without much consideration for what is actually feasible or what is most efficient.
I’d bet that 90%+ won’t even forecast or consider a scenario of what growth rate is achievable while maintaining profitability.
Its like profitability is a dirty word for VCs and I think it’s a disservice to founders.
Some businesses are special and are truly capable of triple/triple/double/double/double growth, but others clearly aren’t but put themselves as risk of dying trying.
Rather than acknowledging the upper limits of their growth potential for the year and considering a year of say 50-60% profitable growth, they go for the huge year before they are ready and instead of tripling or doubling they miss and grow 50-60% but while burning $5-10M+ in cash vs. being profitable.
It is a brutal scenario with unnecessary value destruction in the process.
So if you’re a founder of a VC-backed business don’t forget to evaluate what profitability looks like for you in 2017 and if profitability happens to be the most sound decision for your business, please take pride in that.
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