When you first start your business, every dollar that comes in counts. If you take too long to reach profitability, you might not have enough money to sustain yourself and your business until it reaches that point. Many entrepreneurs set their goals for profitability based on how many years it will take them to reach that point, but that’s not the only way to measure success. In fact, there are other ways of reaching profitability, like being able to pay yourself a salary or having enough business cash flow to give your company financial stability.
Fortunately, there are several things you can do to ensure your business reaches profitability as quickly as possible, including these four steps to reach profitability in less than three years! These four steps can help you reach profitability much faster than you may have thought possible and start living the good life sooner rather than later. Read on to find out more about this approach!
Step 1 – Build a Business Plan
Writing a business plan helps formalize your idea and can streamline the business-creation process by getting you to sit down and think things through methodically. And, yes, plans are (often) worthless, but planning is everything. Many entrepreneurs say they rarely look at their plan once they’ve launched—but they’ll also tell you there’s value in thinking through and researching your idea; writing a business plan is the perfect canvas for this exercise.
Step 2 – Define Profitable
The ultimate goal of a business is to make money. How much money a business makes is an entirely different question. There’s no definitive answer, since it all depends on the business, but there are some basic benchmarks you can use to determine if your company is moving towards profitability. To find out if your company is heading towards profitability you need to calculate how much money you are losing over a specific period of time.
Step 3 – Do the Math
When running any business, one of your first responsibilities is to understand your costs and how they compare with revenues. If you’re losing money or not making enough money, then it’s up to you as a business owner to make a change. The cost side of a business generally falls into three categories: labor, materials and overhead.
Step 4 – Change your Strategy if Necessary
If you aren’t breaking even by your third year, don’t continue along with business as usual. In fact, it might be worth switching strategies entirely. Look at what is working for other competitors and try to imitate their approach – after all, an imitation is just a form of flattery. Switching things up may make or break your small business, but don’t give up too easily: Remember that very few businesses break even in their third year of operation.
Profitable business owners know that their businesses are stable and can grow. After all, you need profitability to be able to expand, hire new staff members, or make large purchases. Many business owners struggle to reach profitability in the first few years of their business’s operation, but there are ways to accomplish this goal as quickly as possible and you can follow them to achieve business success.
