I have earlier said that giving [tag]discounts[/tag] can turn out to be a nasty thing for your business. Then what about all new startups where the [tag]business model[/tag] is to give away things for free?
Anita Campbell has seen an interview with Esther Dyson at the Open Business site about business models for Internet startups. The point of the interview is that “free” is not a substitute for a business model. However, giving stuff away for free in order to draw enough attention to build a loyal community is a good model.
Anita Campbell makes the following comments,
Smart [tag]entrepreneurs[/tag] are thinking about and searching for ways to make money right from the get-go, even if they are not planning to implement the money-making phase of the model for 12 or 18 months. I think it is important to stay mentally focused on making money right from the start. It prevents you from getting caught up in the insidious mental abyss of believing you must give everything away for free forever.
In the interview, Esther Dyson then goes on to note that the “wing and a prayer” business model (i.e., that you don’t have to worry about making money because some big player will acquire your company) does not work for most startups.
My comment is that you must have a plan when your business will be profitable having a positive cash flow.