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How to Tell If Your Revenue Is Actually Profitable (Most Can't) · GTM Made Simple

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  You do see this OpenAI's revenue 3.5 to $13 billion and they at
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  the same time lost 39 billion. Now, let's do the math here and let that sink in. 3.7 billion
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  to $13 billion in revenue. That's explosive growth. Like wow, we should celebrate. Right. But then the
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  R&D cost alone was about 19 billion. So net loss was roughly $39 billion.
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  And and that is a really important gap that we all need to think about. And most CEOs and
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  founders are running through the same hole. But they're not they're not recognizing that they
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  don't they're not OpenAI. They don't have unlimited money. They don't have deep pockets. And
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  I'm about to expose the problem and what you should do to build a profitable business. So let's
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  dig in. Here's what keeps coming up in the last few CEO roundtables. Hey, look, my revenues up. My
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  headcount seems to be up, my activities speaking up. You're doing a ton of AI, but when I ask like,
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  so what is your path to profitable growth. That's what I get.
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  Silence. OpenAI is extremely extreme version of what success looks like, and this is
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  happening everywhere. We love to glorify that 0.001% of the companies. And ultimately, what's
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  happening is that that's not true for 99% of you that are business owners or good market leaders.
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  Growth without great unit economics is just expensive storytelling. And I've built
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  over $200 million businesses. The last company I built, terminus. We built the ABM category. Right?
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  Like so there are hundreds of thousands of jobs, $100 million plus other businesses that came as a
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  result of the books I've written on ABM. You can check it up on Amazon. And then they're using the
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  frameworks. But that happens when you're building a category where something new is happening. Now
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  you can still grow three x, by the way, and still be dying as a business. Then here's why. You can
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  hit your revenue number, by the way, and you can still be burning cash like OpenAI is right now
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  faster than your billing value, which in the case of OpenAI, they're also building value. But that's
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  not 99% of the companies. That's not 99% of the companies ever can do. So the AI hype cycle is
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  exposing companies that are confusing the two things. And that's where maybe you are right now,
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  OpenAI can afford to lose, let's say, $39 billion because they have Microsoft's checkbook.
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  You don't. So the question for every go to market leader right now is this are you measuring
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  success in terms of revenue growth or profitable revenue? This is why I love the go to market
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  system and the CEO roundtables that we run. In one of the roundtables, we were asking these four
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  questions. These are the four questions that that you should just take a pen and paper and write it
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  down. If you don't have clarity on it, man, you are really gonna struggle. Because if you follow what
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  OpenAI and some of the other big things that are happening, that is 0.001% of what real growth is.
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  So here are the four questions. And these are deep questions, by the way, you can't just rattle that
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  off, because if you go around and talk to your executive team, they are most likely going to say,
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  that's not true. So so be ready for it. So here are the four questions. One is what is your real ICP.
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  And when I say real I mean profitable ICP. Not any ICP, not where hey, we did so-and-so. We did one
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  healthcare deal there that was amazing. That was 200 K and then this one. No, no, no real ICP. Meaning
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  where you have a repeatable business that you can go to the bank and say, hey, I'm going to get more
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  of this. If you give me more money to get more of this, and they would give you money for that, right?
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  So what is your real ICP? The more profitable where you have the highest gross margin. Which
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  leads me to the question number two, which is what is your positioning around it. So positioning is a
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  key area to to consider when you think about companies that are like Teslas or OpenAI, they
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  have a clear positioning. They are changing the game in that industry. And if your positioning is
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  like one of your competitors. So right now, if you just go up and, you know, just pick up two
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  competitor websites, yours and your competitors, and the positioning is kind of similar. You really
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  don't have a positioning in point of view. You really are playing in the same category. And then
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  you're going to end up in a price war. So you have to understand and figure out and clarify what is
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  your positioning that is so unique to you that your customers will pay premium for? Which brings
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  me to the question number three, which is do you have a pipeline breakdown by the most profitable
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  ICP? And that's key, not just a pipeline breakdown, because everybody can run reports now and say,
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  give me the how much pipeline do we have? And it's all fake, right? It's all fake news if you will.
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  Because most pipeline if actually it's true and closes we all will be so much more richer. You
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  wouldn't have me on this video watching this, because the reality is you have a pipeline issue
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  at some point, which is what's driving you to figure out how do I solve this problem? How do I
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  become the snowflake of the world? How do I become an open AI? But those are again edge cases. That's
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  not reality for you and most of the business owners and good market leaders. So you need to
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  look at the pipeline by ICP. That is why I asked the first question, what is your real ICP so that
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  you can dig into positioning and see if the pipeline for that ICP is enough for you to build
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  a business. And here's the last one, probably the most important one. What is the revenue look like
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  that is profitable? And how do you know your revenue is profitable? Well, you know your revenue
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  is profitable. Let's say if you have like ten customers and out of the ten customers, four of
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  those customers are from your real ICP. They value your positioning. Their pipeline was in that
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  particular area. So you know, that segment is something that's that stays with you and you can
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  retain you can expand with them. Well then 40% of your revenue is profitable, the rest
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  60% it is going to show up and bite you later on when it comes to renewal. And that's where churn
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  comes up. That's why go to market. Operating system is the way you should think about it. I remember
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  this very clearly at terminus when we're building a $100 plus exit business, there was a time where
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  we looked at all revenue the same. We didn't understand the difference between what I call the
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  momentum growth and profitable growth. So let me just dig into that. Momentum growth is like, hey,
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  revenues up, activity up. We were doing tons of events. Everybody was busy. The board was happy. We
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  were we were at that point probably spending $1.50 for every dollar we were making. So we're
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  hiring so that we can keep up with that growth. And we're celebrating all of it. And we're raising
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  money just like OpenAI is posting there. But then then we saw that, man, we're going to run out of
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  money in like 18 months or sometimes nine months. What are we going to do? And so you are in this
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  hamster wheel. And again OpenAI is the poster is the the poster child for this 13 billion in
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  revenue and 39 billion in losses. That's a -300% margin, just in
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  case somebody is doing the math on that one. But it works for them because they're building an
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  entirely new category that people are willing to put money in 1 in 100,000 companies might be in a
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  position to do something like OpenAI and Tesla is doing, but that's not what's happening with you. So
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  the momentum growth is not the real growth. So now let me bring you what the second type of growth
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  that you should think about, which is the profitable growth where revenues up and the unit
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  economics are working, which means you are retaining customers and they're expanding, which
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  means your cost of acquisition for customers is getting lower, which means you are going after the
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  same segment. This is where you're not just growing but compounding. And that's what
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  profitable growth is all about. So most companies who run on GMOs, we don't advise them to go raise
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  money. We don't advise them most. I mean, in some cases when they're trying to build a new category
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  or so, but in most cases we say, let's look at your unit economics, not what's running hot, but what's
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  running right. We're trying to get hold their feet to the fire on some of the the hard things, the
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  invisible things, the things that actually build strong foundations so you can actually build a
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  business. So if you're practically trying to do this, here's what you need to do today. Go with
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  your team right now and figure out what is the right ICP, the profitable ICP, the ICP that makes
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  money that you can position for. Number two. Start measuring what is what is the efficiency around
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  this? Not just activity because profit is reality. Revenue can go up and down, but profit. That needs
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  to be clear. Cash flow. Your SDRs might be booking a ton of meetings, for example, right now, but all
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  of those all meetings in the right ICP or not, you got to dig into it. I remember this distinctly in
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  in in my last company, man, we were having some meetings that we shouldn't be having. We were
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  selling to some folks that we shouldn't be selling, and that ended up biting us at the end of
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  the year when we were about to raise a fund, because that killed our business. It was the most
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  painful thing we had to do. And then we had hundreds of people trying to figure it out. It was
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  insane. And the third thing is you have to align. You have to align marketing, sales and customer
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  success. Your go to market team, your operations so that they're not looking at different metrics.
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  They're looking at the same metric and aligning on that growth, because you got to have one
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  operating system, one revenue engine, one definition of success. And if you can do that as a
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  CEO, you will be able to stop celebrating this crazy revenue growth. Things actually start
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  spending more time on saying, hey, what are the business unit economics that's actually growing
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  our business profitably? And if you are a go to market leader right now in a company, you should
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  be asking that question to your CEO and executive team is like, hey, which metrics make us profitable?
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  Not all revenue is the same. So if you want to get into the trenches, rewrite research on this every
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  single day on run on gmos.com so you can go check it out. There are 3000 companies who have gone
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  through assessment. You probably are sick of me saying that over and over again, because we just
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  want to have 100,000 companies run on GTM. Always take our assessment. It's free so you can see how
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  you can be a profitable business. So if you're ready, let's get moving.