It hasn’t been a good year for large companies going public.  When Lyft went public in March at $72, it’s price immediately fell through the floor, and it’s currently sitting at $40.  Uber went public in May at $45, and it’s currently sitting at $31.  Peloton dropped 11% on its first day.  WeWork announced an IPO less than 60 days ago, and instead of going public, it’s looking like it might go bankrupt.

What’s going on?

Billion in Funding, Zero Ways to Make Money

The chief reason these companies aren’t doing well is that they don’t have a viable plan for how they’re ever going to be profitable. 

WeWork has a plan to “provide members with a culture of inclusivity and the energy of an inspired community,” but they’re losing $5,200 per customer.  Uber knows how to “ignite opportunity by setting the world in motion”, but they lose $185 every time they get a new rider.  It turns out that it’s easy to have an inspirational business model when it involves losing billions of dollars annually.

These VC-backed companies got something in their infancy that most small businesses don’t; they got to lose money for years and years.  All they had to do was to tell investors that just because they’re losing billions every year doesn’t mean that they won’t be profitable in the future. 

There’s a Lesson Here for Small Businesses, too.

When someone tries to sell a company that’s losing piles of money, we’ve all got a right to be skeptical.  It’s easy to second-guess a company’s path to profitability when they’re going broke – especially if they never knew how to make money.

It’s a lot harder to second guess a company that is making a healthy profit year after year.

But just because a company is making money doesn’t mean it has a path to future profitability.  In 1940, 40% of all non-agricultural jobs in North Carolina were in textiles.  In the 1980s, 90,000 people in the state worked in the furniture industry.  The vast majority of those jobs are gone now, and almost none of the companies who provided them were prepared for the mass exodus to China.

This is why a profitable present is a great time to consider whether your business is prepared to bring about a profitable future.  Is your industry’s trade association flagging any future risks for companies like yours?  How will inferior products disrupt your business model in the coming few years?  Will your growth force you to take a break from growth and restructure the way you manage the company?

There’s no better time to deal with these things than when you have the capital on hand to respond to them.  If you wait until revenue is falling to add new products, you’re not likely to find the money to pay the bills and build a new business model at the same time.  And unless your new product absolutely thrives by undercutting everyone else’s offering, a downturn isn’t a great time to launch a product.

Focusing on the future when the present is going well is a difficult undertaking.  But as a small business, you do have one thing going for you.  Your company is already built on top of much more than soaring rhetoric and a slick pitch deck.  Even Wall Street can appreciate that these days.

To learn how WingSwept can help your company use technology to support responsible growth, call us at 919-460-7011 or email us at Team_WingSwept@WingSwept.com.