If you follow startup websites, you’ve probably seen the term ramen profitable before. What does it mean?
Does it mean that your customers pay you in ramen noodles? Or that you’re selling ramen at a profit?
Nope. It simply means that your startup is making just enough profit to pay your basic living expenses, like food, rent, and so on. In other words, it’s enough profit to live on ramen.
Ramen is a type of Japanese noodle. In the United States, ramen is popularly known as an inexpensive food for college students (as college students typically don’t have a lot of money.)
Thus, when your startup is ramen profitable, you are making just enough money to buy ramen and live cheaply (like a college student.)
Who Coined the Term?
In his essay on the topic, Graham explains the meaning of the term:
Now that the term “ramen profitable” has become widespread, I ought to explain precisely what the idea entails.
Ramen profitable means a startup makes just enough to pay the founders’ living expenses. This is a different form of profitability than startups have traditionally aimed for. Traditional profitability means a big bet is finally paying off, whereas the main importance of ramen profitability is that it buys you time.