A cash cow is a business venture that generates a steady return of profits that far exceed the outlay of cash required to acquire or start it. Many businesses attempt to create or acquire such ventures, since they can be used to boost a company's overall income and to support less profitable endeavors. The term is also sometimes used in a derisive way, usually in a discussion of the complacency of a company about a profitable product.
The classic example of a cash cow is a milk cow. Milk cows require a small capital outlay when they are acquired, and minimal maintenance costs afterwards. In return for their low maintenance costs, milk cows generate milk throughout their adult lives, along with calves. Since the 1600s, people were using “milch cow” to refer to a profitable venture; the modern term emerged around the 1970s.
Several features distinguish such a venture. The first is the relatively small capital outlay and maintenance costs. It also typically represents significant competition in its market, and it usually generates innovative and interesting products that capture ever-larger market shares. Cash cows tend to attract customers with an array of products and favorable pricing schemes, although some also sell more expensive products; Apple's famous iPod line is a classic example in the technology sector.
Although a cash cow can be very beneficial for its parent businesses, there are some cautions involved in dealing with it. One of the major problems that companies face is complacency when handling their profitable ventures. For one to succeed, a company needs to respond to changes in the market, ensuring business growth and a dependable flow of cash. If it is allowed to remain stagnant, other companies will capture its market share.
The term is also used in a totally different context, to refer to companies or organizations that have no control over their spending. In this sense, sections of a government budget, like defense, may be referred to with this term, in a reference to the fact that taxpayers are being milked to pay for them. The implication is that funds are being inefficiently and poorly used.
