Updated: Jul 24
How does a startup founder become rich exactly? Most startup companies have no business. The ones with business has no profit. Why? One must understand exactly how a startup business becomes a business. A startup started with niche market and enters broader market. It must build technical barrier of entry related to automation and efficiency.
Volume makes scaling possible. Scaling and ceiling makes it possible to acquire investment funding - hence actually building the barrier.
Without a large body of water, there is no need to build a top boat, and then there is no long lasting business to do. A startup business will forever be a small business.
That is why experienced investor will never fund a solopreneure who does not understand the word "ceiling".
With high volume and high efficiency, a company can reduce the cost per unit, increase the quality, and reduce the price. Reducing the price makes impossible for competitors to come in.
So lower price causes larger profit. This is the way for founders to get rich.
Scaling - volume - fat market - specialization - low price - large profit.
The secret to get rich is to have volume business.
Customers demand value, which is work. They pay a fraction of the value as price to acquire your value.
If the customer is one off and you take a lot of time acquiring customers, you have to work very hard to provide the value or perceived value, and they will negotiate the price hard. You don't make money. You must "pay the bills". Many startup founders have no money to pay their own salary.
Acquiring customer is very expensive. Research and very expensive. If you don't have a base to automate it, you will never be able to "work hard" enough.
If a company has one person, and facing very few customers, your only way to provide value is to over work, which makes it impossible to grow.
A "lean business" is where the volume ceiling is low.
A "tough business" is a "lean business" where the margin of producer is low.
If you are in a niche market but you figured out how to acquire customers, and you happen to live in an area where good talents in research comes to you abundantly, then you are still doing OK financially.
An example of many Germany family businesses - they specialize but never bother to grow big. But this can only be done in Germany, not other countries.