Nasty Gal’s Bankruptcy Proves Why You Must Focus on Profit Not Revenue

Nasty Gal filed for bankruptcy recently as reported by the NY Times. Many businesses file for bankruptcy – this is not new. However what disturbs me is that entrepreneurship has this glamor associated with it. This halo around it that is blinding for so many who seek to follow that path. Revenue vs Profit – that’s a dilemma that so many face and focus on the wrong one.

My hat is off to Sophia Amoruso, Nasty Gal founder.

However, if we entrepreneurs grow too fast, get dazzled by outside funding and just get media attention, that’s not a plan for true business growth. At some point, as we have learned from Shark Tank and Norm Brodsky, Mike Michalowicz and others  – profit is essential and must be obtained.

High growth, venture capital, debt, growing fast and fearless are all “cool” and sometimes important – but losing site of profit, cash flow, and steady growth means you’ll be out of business.

Ironically, the day before their Nasty Gal reporting, the NY Times also reported on Mailchimp. A company that has steadily grown over the years. It’s one of the leading email marketing company in the world.

Under the radar, slowly and steadily, and without ever taking a dime in outside funding or spending more than it earned, MailChimp has been building a behemoth. According to Ben Chestnut, MailChimp’s co-founder and chief executive, the company recorded $280 million in revenue in 2015 and is on track to top $400 million in 2016. MailChimp has always been profitable, Mr. Chestnut said, though he declined to divulge exact margins. The company — which has repeatedly turned down overtures from venture capitalists and is wholly owned by Mr. Chestnut and his co-founder, Dan Kurzius — now employs about 550 people, and by next year it will be close to 700.

Revenue is all the money you earn from selling your products or services. Gross profit is what’s left after taking into account the COSTS it takes to MAKE what you sold.

Gross profit is what’s left after taking into account the COSTS it takes to MAKE what you sold.

Focus on your gross profit, your margins and your net profit – the money left over after ALL expenses are accounted for. This is how you build a great company.

Dear entrepreneur, slow and steady is often the way to success. Focus on profits. Focus on keeping your customer’s happy. Focus on keeping your employees/team happy.