Going from default dead to default alive is huge. But a 3% profit margin just keeps you alive until some disaster occurs and then you’re still dead.
Going from 5% to 10% might be leverage in the market, but you were still going to limp along anyway. When I’ve been at startups trying to do things like this, it’s very clear that the investors have in their head some notion of multiplying your profits. Every company I worked for that pulled this ended up cutting to the bone later. I don’t think that’s a coincidence.
These days I’m not sure labor is a big enough part of the cost mix for a 10% layoff to actually show up as 5% margin. I pulled that out of my butt and now I’m having second thoughts.
Going from 5% to 10% might be leverage in the market, but you were still going to limp along anyway. When I’ve been at startups trying to do things like this, it’s very clear that the investors have in their head some notion of multiplying your profits. Every company I worked for that pulled this ended up cutting to the bone later. I don’t think that’s a coincidence.
These days I’m not sure labor is a big enough part of the cost mix for a 10% layoff to actually show up as 5% margin. I pulled that out of my butt and now I’m having second thoughts.