How long does it take to reach profitability in a start-up? It depends on many factors, including your business model, your management style, and the way you grow your sales. While there are no guarantees when it comes to profits, you can still create plans that estimate how much money you can expect to make and how long it might take to earn it back. Use these strategies and tips to reach profitability sooner than later.
Hustle
On average, most start-ups will lose money in their first year. In fact, nearly 50% of businesses fail within their first year. But you know that startup founders and employees don’t care too much about paychecks at early stage companies – they just want to work on something that matters and find out if they can make it big.
Assemble the Team
Once you’ve decided that you want to start your own business, now it’s time to decide what type of business. As an entrepreneur, there are many questions that need answers. One is: How much will all of this cost me? That can be tricky because one of the first things that happens when someone starts their own business is they end up spending money they hadn’t planned on spending.
Launch
Depending on your industry, average time to reach profitability could be anywhere from 3 years down to 6 months. When starting a business or launching a new product, there are many factors that will influence how long it takes to be profitable, so take your best guess based on your industry and then start planning for what’s next! Consider strategies such as lowering costs and increasing sales volume.
Grow your user base
Next comes growing your user base. This is more than just marketing, although that’s certainly important. It also means continuously improving your product or service based on customer feedback, and so building a better relationship with your customers. At some point, you’ll realize that you can’t possibly meet customer demand by yourself. You will either need to start hiring employees or outsource certain tasks (see below). If you’re prepared for either one of these scenarios from day one, you have an excellent chance of succeeding.
Reach profitability
The next phase is reaching profitability and sustainability. You will have found your niche and understand what your customer wants from you. You will now be able to create systems, which allow you do to more with less effort. This frees up your time and money, allowing you focus on other aspects of business such as marketing and product development. On average, SME’s reach profitability between 9-18 months.
For every successful entrepreneur, there are dozens of business that never made it off the ground. Some businesses fail because of bad ideas, poor timing, or inefficient execution, but more often than not, it’s because they ran out of cash before they could succeed. For new entrepreneurs looking to minimize their risk and maximize their chances of success, here’s how long it will take your startup to reach profitability from different starting points. If you’re currently running a company, you can use this guide to evaluate whether your approach is on track to profitability and how to get back on track if not.
