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What Are Non J Curve Businesses?
There are two types of businesses: compounding businesses and J curve businesses. A J curve business is one that initially loses money before making money, represented by the shape of the cash flow graph. Technology businesses often follow a J curve model, where significant money is spent upfront on development, and profits start to accumulate once the customer base grows. Other examples of J curve businesses include setting up a restaurant, where a large expense is required initially, and a certain volume of customers is needed to break even. On the other hand, there are non J curve businesses like consulting, where a single client can generate substantial revenue without significant overhead costs. These businesses can quickly become profitable with a few clients and minimal expenses. Consulting in areas such as optimizing manufacturing processes can be highly lucrative without following a J curve model.
