Profit = Revenue minus expenses

in #steem3 years ago (edited)

Well, the bear market is in full swing, and everything seems to be going to shit for the moment. It's probably not even done. Bitcoin could touch 1k before this is done meaning that the carnage isn't over yet, but that said people are still building here. In some ways it's a great time to build. It takes time to get things in place and moving, and hopefully by the time that you're ready to operate we'll be back in bull territory and you should be able to capitalize on that.

Profit isn't it's own thing

Profit is a derivative of two other things: revenue and expenses. There's nothing you can do to change profit directly. That's because it's made up of those other two things. You either have to raise revenue or lower expenses.

I still have to review buisness plans for competition I put out there. I got a little behind with the whole baby thing, but I just wanted to put this little reminder out there of what makes a business a good business. Good businesses are profitable. How do they get there? They control their expenses and they collect revenue.

If you're considering building a business on the Steem blockchain that's great. We need more of them. And as ways become available to have tokens on the chain either through side chains or through the blockchain itself there's a better and better chance people here will be able to aggregate funds and build great apps/dapps here.

My primary word of caution though is you have to figure out how to charge for a service that people want. I don't think it's a real business to have a stake and dole out rewards. As you can see that isn't a sustainable model especially when the prices go up and down. You need to have a service or product, collect revenue from that, and make sure you're spending less money than what's coming in.

Charge fairly

You have to do some market research to figure out what people are willing to pay. Charge too much and you won't get the sales. Charge too little and you won't have enough money for expansion. Try a range of prices and see what sticks. Ask your friends, family, and customers what they would pay or what they think it's worth before committing to a price.

Keep expenses down

When you're boot strapping a company it's best to keep costs down. Yes you could run off that super expensive brand new thing, but ask yourself if you can get something used that does 95% of the job at 30% of the cost if that's good enough. Try to keep your money burn rate down.

Minimal Viable Product

With physical products your goal has to be to ship something that's complete and finished. No one wants a physical product that barely works. Software is different. You need to get the simplest thing out the door that can start generating revenue and then make continuous improvements.

If Steem Monsters had waited until tournaments were done to release we'd have had zero revenue and a big burn for 8 months. That's a rough way to start a company, so you have figure out what is the shortest distance between you and revenue and get there as quickly as you can.

Don't lose faith

Crypto is for sure having a rough time, but if you want to catch the next bull market you have to be in a good position with a product to do that. So, strap in, eat some raman, put down the gold lunchbox, and get lean. When the bear market is over, your product is ready, and you're able to capture revenue then you'll have a big fat smile on your face.


Hi @aggroed
I greatly enjoyed this post. It was long, but well written and an easy read. I think you hit the nail on the head with regards to business success. I like to think it’s like options trading, know the rules and follow them, deviate and be prepared to lose money. I think that knowing your costs and monitoring your cash burn rate are very important. I have been a partner in a few ventures and soloed a few more. I find estimating revenues is tricky, so I get help and always go with the lowest realistic estimates and with costs I go with the highest just to be safe. This has never let me down. Whenever I took the higher revenue estimates the cash burn rate led to the need to make cost corrections in terms of staff, which is demoralizing and can be a prelude to failure. But it doesn’t have to be if you correct your course are open and explain why the remaining positions are safe.
I especially like the part about charging a fair price and being paid enough to stay in business. I always say that people don’t value free stuff even if it’s valuable. You need to charge enough to stay in business and make people know your work or product is valuable. If your giving it away, why should they want it?
In regards to Steemit, I was very sad about people being laid off right before the holidays, my prayers are with them and I hope they had assistance with new employment. I am however glad to hear of the focus on lowering costs and focusing on revenue like Ads. I am also encouraged that people with large amounts of Steem have become more active on the platform and vocal about making suggestions to turn things around. I hope they consider hiring a turnaround specialist to take a look at things, he/she may have an open objective mind about all the solutions proposed by the community.

Take care,

@shortsegments "find estimating revenues is tricky, so I get help and always go with the lowest realistic estimates and with costs I go with the highest just to be safe. "

So you should always have a buffer zone to stay comfortable.

I agree that a buffer between the estimated costs and estimated revenue is essential. By choosing the lowest profit estimate I hope actual profits will be higher creating a buffer. But I understand that building a buffer in the beginning is safer. Thank you.

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Good call.... it's $0.50 packet noodles time!

Honestly though, this is an incredible opportunity that I never thought I'd get to see.

I agree that when I joined Steemit, I wished I had joined earlier when it was cheaper. I would speculate that Steem was probably not wildly popular when it was pennies, but when it was close to ten dollars it was, which is something to keep in mind when we are hesitant to buy Steem now at these low prices.

It's very hard for me to remain silent/positive about things right now, but Im trying...

And one good thing is that the larger accounts here on steemit are more responsive and I can see how the coin has dropped for the "inner-circle-of-super-evil-upvoters" and you see larger accounts reaching out and helping smaller accounts, or at least replying to comments and sometimes throwing the little guy a bone or two... 😀


I wholeheartedly agree!

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I feels like "bad times" might teach people to cooperate...
I might be wrong though...

Well, no problem, keep on trying :)

Gear Up for 2019

and.... HODL...

Great suggestions for those finally seeing the potential of how successful projects can be built here on the blockchain. I look forward to seeing more of the great talent we have in the ecosystem create and develop projects that will continue our engagement with the community.

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lol we'll definitely be eating some ramen this week! hahaha

Hi, @aggroed!

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A picture says more then 1000 words :) Make money :D

and you are right. Starting is the most importent in business. Dont try to get build something perfect that need time like forever.

Get start and then improve! really wise words!

I love what you writing because you get the point. I see you are a business men, and i love it to see you as a witness!!!!!!!

Resteem and upvote from me Sir!

Wise words being spoken, I'm just out here enjoying the ride. Can't allow the negative to bring you down, when we know what goes up must come down and vise verse.......

Dear @aggroed

I also believe that BTC can go down all the way to 1000-2000 usd. It's not only panic sell coming from us investors. Right now many cryptos and ICOs are trying to survive. And they are selling whatever thay have in order to get enough funds to get them going.

STEEM and Steemit Inc is a great example of it. To cover operating costs they are forced to sell their own reserves. And lower price is -> more they have to sell. Because most of their costs are in FIAT currency. That's just crazy cycle.

At this stage there is no trust, noone want to take risk of investing since ratio risk and profit is just awful bad. Risk is huge and chance to make any profit close to zero.

And it will most likely stay this way until most current projects will shut down. So they would not be able to sell anything any more. It may still take few months, but ... more blood on the street = better. We will clear crypto space from all those dead projects.

And only then we can start rebuilding trust.

Plus lack of regulation isn't helping. I dont think I know any investor who like to be in a limbo. Knowing that even if he would somehow manage to make profit then he may have problem later on with tax officers.

Personally I believe that we all have to wait for STO (security token offerings) to become new thing in 2019. Next few months can be VERY difficult to many of us.

I don't think it's a real business to have a stake and dole out rewards. As you can see that isn't a sustainable model especially when the prices go up and down

I wonder what's your view on security tokens ? After all those are backed up by real assets. And this changes EVERYTHING.

Imagine that by purchasing big part of STEEM you could purchase ownership of company behind it? That for instance you could buy Steemit Inc and replace all their team with your own people. Would Steem Inc. be still selling their own tokens now? I hardly doubt so.

This would reduce supply a lot.


I can agree with you on 90% of this. But honestly profit isn't only measured in numbers on a screen. Some profit is accomplishing a certain goal not just adding another dollar in your pocket. In fact if your in business just to earn a buck your doing it wrong. The best business in the world solve a problem and that solution is the profit. While you do need to build a monetarily sustainable business if you look at the business that failed its because all they cared about was a quick buck. If you look at the business that succeed its because they solved a problem and that solution was valuable enough for people to spend a few bucks.

"My primary word of caution though is you have to figure out how to charge for a service that people want. I don't think it's a real business to have a stake and dole out rewards. As you can see that isn't a sustainable model especially when the prices go up and down. You need to have a service or product, collect revenue from that, and make sure you're spending less money than what's coming in." That just gave caution against what made facebook so successful at the beginning why not try it again? They made something that people liked and got users on board and only then did they think about how that was going to make them money

If your charging steem dollars for your product or service it is no different of a business model than owning a stake and doling out rewards as you are just as susceptible to the ups and downs of the market as if you owned a stake. Lets say you order 1000 t-shirts and pay 5 usd each and turn around to sell them for 15 sbd but then sbd crashes far below the value of 5 usd you will be losing money. Basically no difference between selling or putting up a stake. All business are subject to the volatility of the steem price.

The creators of bitcoin saw how much profit there was in the freedom from centralized money so that was added into to the profit margin. So with only owning stakes they have solved a problem that the solution is now so valuable that their stake is worth money. This is why bitcoin is so successful because Their first goal was solving a problem and with out that even if your business gets up and running it will not be sustainable in the long run as it will just be a fad.

Lets use steemmonsters as an example: It solves several problems for the gaming community 1) it guarantees the authenticity of a card. 2) it puts that collectible card on the block-chain 3) It provides entertainment on a platform where people come seeking entertainment.

Lets say it cost you 1/4 of the price you charge to create one card. and lets say the price of steem stayed at 1 usd when you sold 100,000 steemmonsters. Then all of a sudden steem goes down to 0.25 usd well you have lost all your past profits as that barely recoups your cost. That's the risk your taking for possible gains in the steem token.

Now if you have a stake in an app(steempower) and only dole out rewards. your stake will earn you rewards from the beginning while not actually costing you any money, as doling out a reward cost you $0
So lets compare that to your definition of profit "Profit is a derivative of two other things: revenue and expenses." If your cost are zero because your revenue is rewards than you have a 100% profit margin therefore making it a success from day one even if the business fails as you have made a profit. not to mention that as long as you spend less than your rewards you will be able to survive the ups and downs of the steem price and have a stable platform to work from.

Other than that I agree with your thoughts on the charge fairly, keep expenses down, minimum viable product and not losing faith.

Oh and in my opinion the number one thing that matters in a successful business is the top management. If you don't have a good management team then nothing else will help it become successful. Good ideas fail from poor management and horrible ideas work because of good management

If you read this all sorry for my long rant. I just have a lot of passion on this subject. I do have respect for you aggroed so I hope you are having an awesome holiday season with the whole baby thing! that is always exciting

Not short on faith! I just voted your witness!

It's really simple as that in theory. SteemMonster cards are digital collectibles you can play games with. People pay money for such things. Which categories of assets do you think would be best suited to live on STEEM?

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Steem Monsters rollout has been smoother than many leading games that I've paid x10 the cost for -- And dont get me started on games that are still in Alpha and been abandoned!

Thanks for the advice really is needed in these times :)