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Your Customers' Profitability is Your Startup's Future Health by @ttunguz

tomtunguz.com · 338 words · saved by 1 readers

Ten years ago today, I wrote a post titled “Choosing market segments on customer profitability.” How healthy are the business’s underling customers? Today, that question matters more because of the recession than at any point in the last decade. Selling to very profitable customers benefits a startup. Account executives can charge a highly profitable company more than one without much money. I compared the profit margins of selling to a grocery store, a restaurant & a software company to illustrate the point. The grocery store generates $44b in annual revenue but only 6% falls out the bottom of the P&L as earnings to invest in new projects like a modern data stack. The restaurant fares a bit better with EBITDA margins of 14%. The software company towers above them all at 33%. A third of their revenue can be reinvested in new ideas. Which customer segment would you prefer to sell to? In addition to industry, customer size also impacts profitability. Enterprise customers’ demand is price

In short : Explore how customer profitability impacts startup health and pricing strategies in SaaS markets. Ten years ago today, I wrote a post titled " Choosing market segments on customer profitability. " How healthy are the business's underling customers? Today, that question matters more because of the recession than at any point in the last decade. Selling to very profitable customers benefits a startup. Account executives can charge a highly profitable company more than one without much money. I compared the profit margins of selling to a grocery store, a restaurant & a software company

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