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Paul Tracy

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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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Updated January 16, 2021

What is Critical Mass?

Critical mass refers to the size a company needs to reach in order to efficiently and competitively participate in the market. This is also the size a company must attain in order to sustain growth and efficiency.

How Does Critical Mass Work?

A company's critical mass is determined by the size of its staff, resources, revenues, and market share. Once these elements reach the size that enables a company to operate efficiently, it is said that a company has reached its critical mass. Critical mass is the point at which a company becomes profitable.

To illustrate a company's critical mass, consider Company XYZ which was recently formed and has been experiencing steady growth and increasing strength in the market. The company’s steady revenues allowed Company XYZ to invest in more capital and to hire additional employees. XYZ's productivity subsequently increased and their revenues exceed their expenses: XYZ then becomes profitable. The company is said to have reached its critical mass, since its capital and human resources have reached a size at which they can sustain themselves through productive efficiency.

Why Does Critical Mass Matter?

A company's critical mass is important to consider because it can mean the difference between thriving and surviving in a market environment. A company that sustains profitability is safely above its critical mass.

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Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Critical Mass, then please ask Paul.

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