founders paras chopra, chapter by chapter
30. Generating Profit Requires Creativity
Revenue is obvious; keeping a surplus away from competition is the real invention.
Any company can buy revenue by giving customers more than it charges. Profit is harder because obvious margins attract competitors, who bid the surplus away through lower prices or higher costs. Durable businesses often make their money somewhere non-obvious: the cinema may screen films but earn on food and captive convenience.
Trace revenue all the way through costs and competitive response. Ask why the margin has not already been competed away and what peculiar capability, position, or cross-subsidy preserves it. Growth that never reveals a credible path to profit is activity, not business quality.
Original sketch and model by Paras Chopra. Read the source chapter.