Three of the most important things startups need to focus on / demonstrate if they are raising money, want to grow or just plain want to be successful:
1. Gaining customers (or if no proof of concept then a list of qualified customers)
2. Showing they know how to grow their business
3. Demonstrating profitability and ROI
These points may sound easy to achieve and you may be saying to yourself, ho hum, I don’t need to read further.
Point number 3 – Demonstrating profitability and ROI. A lot of startups get lost here. They don’t realize that you have to invest/spend money in order to make money – Lie #4 – I have to show a profit before I can market. Investors (and actually the company owners should feel this way too) are looking to see if you’re profitable or when you are predicting profitability (break even and beyond). And tossing some money out willy-nilly at marketing efforts will never bring ROI into your company…marketing is a strategic exercise that requires thought and planning and, well, strategy.
Here’s some definitions and formulas for calculating ROI and profitability: