Value Capture
Are you capturing the value you create?
Revenue is vanity, profit is sanity, cash is reality
Perceive: What Is Profitability?
Profitability is the ability to generate more value than you consume. It's the fundamental measure of whether a business model works.
The cost of acquiring a customer is substantial, particularly in chaotic and overcrowded marketplaces, while the cost of selling them more or selling them more often is significantly less.
The Four Growth Levers
The primary ways to grow the profitability of any business:
| Lever | Question |
|---|---|
| Grow Marketshare | Can you increase your number of customers? |
| Increase Value | Can you increase average transaction value, pricing, bundle size? |
| Increase Frequency | Can you increase frequency of purchase? |
| Reduce Costs | Can you lower the cost of transformation and distribution? |
Question: Why Does Profitability Matter?
Without profit, you're burning runway. Eventually, the runway ends.
The Virtuous Cycle
Engineer virtuous cycles that improve customer experience and strengthen trusted connections
Profitable businesses can:
- Invest in product improvement
- Weather downturns
- Attract better talent
- Create strategic optionality
Unprofitable businesses:
- Depend on external funding
- Make desperate decisions
- Lose best people first
- Have no room for error
Profit vs. Growth
The tension between profit and growth is real but often misunderstood:
- Growth without profit is a bet on future profitability
- Profit without growth means declining relevance
- The best businesses find ways to do both
Act: How to Improve Profitability
Increase Income
| Focus | Plans | Execution |
|---|---|---|
| Sell More Items Per Sale | ?/5 | ?/5 |
| Sell More Frequently | ?/5 | ?/5 |
| Grow Distribution | ?/5 | ?/5 |
| Increase Prices | ?/5 | ?/5 |
| Reinvest in Growth | ?/5 | ?/5 |
| Invest Profits | ?/5 | ?/5 |
| DePIN Strategy | ?/5 | ?/5 |
Decrease Expenses
Reducing costs can increase profit margins through process improvements, automation, and outsourcing.
Reduce Operational Costs:
- Cost of Goods Sold
- Operations Software
- Property Management
- Cost of Production
- Cost of Sales and Marketing
- Cost of Supporting Operations
Eliminate Friction
Build systems to run Business Operations as a Service with AI Agents on Crypto Rails.
Profitability Checklist
- What is your gross margin?
- What is your customer acquisition cost?
- What is your customer lifetime value?
- Which products/services are most profitable?
- Where are you losing money?