Business, it never ceases to amaze me

Could it be…a company that has been in business for 17 years and has never made a profit?  No, it gets even better. Imagine this same company executing a successful IPO in just the last 90 days. Impossible you say…think again.

Such is the story of Angie’s List, an Indianapolis-based company. Angie’s List is a ‘business review’ company that allows individuals to post reviews of businesses they have used and then people who sign up with Angie’s List as members can use these reviews to evaluate various companies (from plumbers to pediatricians) before making their own choice for the particular service. A great business model, but heaven help me…how does anyone continue to stay in business for 17 years and NOT make a profit? 

Angies’s List reported a Q4 loss in 2011 of $5.9 million. Even though the company did $90 million in sales in 2011 they posted a loss of $45 million. Amazingly, this company with its national presence increased its sales in Q4 by 70% but still could not show a profit. All that said and after 17 years of UNPROFITABLE existence…analysts are having a love affair with this company! I don’t get it? One analyst was quoted in an article about Angie’s List as saying, “(the company) continues to sustain operating losses in the early development and market penetration stage, which are largely expected to continue.”  Early development and market penetration stage? They’ve been in business for 17 years!  How long a ‘ramp up’ period do you give these guys? As a former officer of a publicly traded company I can tell you we never were given this kind of latitude. It was make your numbers quarter to quarter or else! 

Now, contrast Angie’s List performance with that of the minor-league Indianapolis Indians who despite a troubling economy in 2011 made major league profits of $1.1 million on revenues of $10.1 million. Even though it was plagued with a struggling team, a wet early spring followed by a summer of stifling heat, they somehow managed to sell tickets, put people in the stands, and make an impressive profit. My congratulations to Cal Burleson, General Manager and the entire Indians organization. 

Over the course of my professional life I’d like to think I’ve learned a few things about business but the Angie’s List story is puzzling for me. Really, I just don’t understand how any company stays alive for 17 years without making a profit and then somehow can convincingly woo the analyst and investment community in order to complete a successful IPO. I love their business model and I love the digital world they are a part of, but as a small time investor, I look at these two scenarios and I know where I’d put my money…”Play Ball!”
Source: blog

Posted in business, Indianapolis, leadership and tagged , , .

Harold “Bud” Boughton is a husband, father and grandfather who is often referred to as “the teaching coach.” A former senior executive, published author and professional speaker, Bud currently works for Shine.FM radio, a community-supported, not-for-profit Christian radio station affiliated with Olivet Nazarene University in Bourbonnais, IL. He will continue to work for Shine.FM in conjunction with his responsibilities as Co-Director of Team Focus – Indiana. You can reach Bud Boughton by calling 317-258-6372 or click here to leave him a message