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path to profitability (P2P)

Path to profitability (sometimes abbreviated as P2P, which also stands for peer-to-peer ) is a term that refers to a business plan that is designed to take an enterprise from startup to turning a profit. In Internet business, the prevalent emphasis on profitability, especially in the e-business world, is in contrast to the attitude prevalent in recent years, when dotcom ventures were often encouraged to open for business, "burn" enough venture capital to dominate a particular business niche, and worry about profits later. Industry and stock market analysts suggest that the popularity of this term indicates a return to traditional business practices and a new, more mature stage in the evolution of the Internet.

Before the market slump of the spring of 2000, almost any entrepreneur with a concept and a PowerPoint presentation could obtain venture capital funding for a dotcom enterprise. Optimism about the future of e-business led to a suspension of traditional business principles and practices: an entrepreneur was not necessarily required to demonstrate a clear business plan - with profits in the foreseeable future - because the ultimate payoff was expected to be so large.

With the slowdown in technology stocks, there has been a return to standard business practices. Investors are much more cautious than they were in the early days of the dotcom boom. In order to obtain funding, entrepreneurs are expected to have a well-organized business plan with a clearly articulated - and hopefully short - path to profitability. Some analysts believe that the market change was, in a literal sense, a correction, since the practices employed did not lead to sustainable growth. Many are still optimistic about the future of e-business, although that must be in a world in which the old business rules - such an enterprise's need for a path to profitability - still apply.

This was last updated in March 2011

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