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  • Writer's pictureDeJuan Wright

Why Brand Equity is More Valuable to Your Startup Than Profitability

Updated: Jan 27

Being a business major in college could give you innumerable advantages in both business and entrepreneurship that aren't afforded to those that never majored in business. And even more so, it can certainly give you a huge advantage over those that have never taken any courses in business at all for that matter.

As an entrepreneur, who majored in business myself, there’s not a day that goes by where I don’t find myself presented with a problem for which its solution was not either taught directly to me by way of a lecture from one of my college professors—or, its solution was provided via one of the many business textbooks that were required reading for my courses.

Do not get it confused, studying business in college can definitely give you an edge. Especially when it comes to handling many of the day-to-day activities that you’ll surely encounter while trying to scale your startup.

However, despite the many advantages that go along with learning business in an educational institution, there’s a plethora of things in business that you’ll have to learn outside of the classroom and textbooks.

Due to the emphasis on net income economics, most universities in the United States primarily teach their students the importance of ensuring that a business achieves profitability. While neglecting to teach students the value of brand equity—which is something that is even more valuable to your startup in the long run.

The true value of brand equity

If declaring that brand equity (which is the value of a brand that is determined by how its audience desires and perceives it) is more valuable to your startup than profitability sounds crazy to you, it’s totally understandable. Besides, that theory is completely contrary to just about everything that you were probably taught in school.

But as Forbes chairman and editor-in-chief, Steve Forbes, once said, “Your brand is the single most important investment you can make in your business.”

If you noticed, some of the things that Forbes did not mention as being the most important investments you can make in your business were: MRR, sales, profits, capital, or any other tangible assets that we all were taught to prioritize over everything else in our business classes.

Make no mistake, all of those tangible assets are absolutely essential when it comes to the survival of your business. After all, if a company has no revenue or capital, it isn’t going to be a company for very long.

But the reason why building brand equity is the single most important investment you could make in your business is because even despite a lack of revenue, profits, or capital, with great enough brand equity—you could still have a business that is much more valuable than your competitors whose companies may be far more profitable.

Startups with low profitability but great brand equity

It’s quite easy to understand how most could assume that just because a company is omnipresent—that it has to be profitable. Unfortunately, things aren’t always what they appear to be in business. In fact, some of the biggest companies in the world have yet to turn an annual profit.

According to Yahoo! Finance, Some of those companies that have yet to turn an annual profit are:

  • Airbnb

  • Blue Apron

  • Peloton

  • Reddit

  • Stripe

  • WeWork

  • Zillow

Another company that you’re probably familiar with that has yet to turn an annual profit is Spotify, the digital music service that currently has over 517 million users and 210 million premium subscribers.

Even with over half a billion users, Spotify still isn't a profitable company. But what Spotify does have is a ton of something that surpasses profitability—brand equity.

Why brand equity surpasses profitability

The reason why none of the companies named are considered failures in Silicon Valley or on Wall Street despite not having ever turned an annual profit, isn’t because investors simply think they’re cool or they don’t understand business.

The reason why those companies are actually considered successes (despite some of them having been involved in a few controversies) is because they all have great brand equity.

If any of the aforementioned companies were to announce that they were up for sale tomorrow, investors would be at their doorsteps offering to buy them for billions of dollars—knowing that they have yet to turn an annual profit.

That's how powerful brand equity is. And with great enough brand equity, your brand will always be valuable in the market.

Rather than following the path of most startups, which is to focus entirely on revenue and profits, make it a top priority that your startup focuses on brand equity. The way to do that is by making a concerted effort each day to build the biggest and most relevant brand possible for your target audience.

Remember, by doing so, even if your competitors may become more profitable—your brand will always be more valuable.

Let’s discuss your brand

At Decryption, we understand just how challenging it could be turning your startup into a valuable and highly-regarded brand. Let's discuss your brand and which ways that Decryption could possibly be the marketing firm that provides your startup the various marketing services that are required in order to help your startup achieve that objective.

Contact us to schedule a consulting call and we can begin the process of helping your startup advance.


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