A new firm creates a sales model describing how it will generate revenues from its customers. Then it determines a cost model and how to generate profits from its revenues. The revenue and profit engines show how the firm will create powerful value for its customers and how customers will enable the new firm to profit. Many new ventures assume that profit will flow naturally from sales but discover that profits are not guaranteed. It is difficult to operate in a market that is chronically unprofitable.
A new firm seeks positive cash flow as soon as is feasible and acts to move to profitability early in its life. Managing revenue growth is important since uncontrolled growth can lead to negative cash flow and the need to constantly raise new funds from outside investors. Furthermore, a firm needs a plan to harvest the benefits of its growing venture for all owners. Entrepreneurs must also be realistic and accept that termination of the new venture is a possibility.