Originally posted by JayC
If you sell at a loss, doesn't more volume mean more losses? What do you make up in volume if you're selling at a loss?
Customer base. That's the whole point for selling at a loss or a very limited profit; to build your customer base, and charge them more later.
Some of the most interesting business plans ever written were developed in the dot-com boom. Some of these companies are still losing money, and when the venture capital runs out, they will close their doors because they were not able to turn the cash flow problem around. Their "jack it up later" plans did not pan out and they and their investors lost the bet.
I know of one domain registration service who loses $1 a domain, for every domain registered. They are prepared to lose $100,000 this year in domain sales losses. Their plan? Raise prices next year. They already charge for transfering out of their system, so most people don't transfer out. They plan to double their rates next year. They call their existing rates "Special pricing" and don't tell anyone they are going to be jacking up prices in a year, however their TOS states that they can raise prices at any time and existing customers are not grandfathered into the old prices. How do I know this? I was approached to invest in the company when they started. I still have a copy of their prospectus.
Would I want to position myself like that? Absolutely not. I would not even associate myself with these guys. I did not invest.
Will they be successful? Yes - for the short term.
Will they be around in two years? I highly doubt it. The owners don't care however - they believe they will have moved on to the next project by then, and plan to sell the company at the end of their second year. They will sell a profitable company, probably get a bundle for it, likely selling the customer base to NetSol or someone else with deep pockets.
Sorry. That's not how I work, even if there is more money in it that way.