Hi all,
To be honest, i’m not even sure if there is a general answer to this, but am going to be creating a business plan soon and was wondering if there is a rule of thumb regarding the time it takes for a business to become profitable. I would expect a online business, particularly ones offering a service to profit quicker as there are much less overheads, no stock to buy etc. For example is 6 months from startup sound a little quick?
Thanks in advance.
As you mentioned yourself, it is pretty much impossible as there are too many factors that need to be considered. You are right in the fact that online businesses tend to be profitable quicker than a brick&mortar business, as you don’t have to buy that much stuff to establish a website.
It is obvious I can’t help you any further, because my guess would be at least as far off as yours. But if you just follow your business plan you can, sort of, calculate your advertising income (if you have some sort of visitor stats) or sales (with visitor stats) as well. Maybe that could help you determine whether it’s all worth it.
It can vary. I know some online businesses that have been around for 5 or 10 years and never been profitable.
It also depends on what your definition of profitable is. Some people consider a website profitable if it covers its’ own costs with a little extra leftover for pizza & a movie. I don’t consider a website profitable until it’s earning enough to support itself and pay me enough of a salary to live on.
I have seen a few business plans in my time. It is true that there are just too many factors, and that the projected profitability sometimes never happens. Nevertheless, about 70% of the plans show a profit the first year with the remaining 30% showing a profit on the second year. {This is off the top of my head, with a small sample. and me trying to remember them in my head}
That would make 100% of new businesses profitable within 2 years.
According to the US SBA, 50% of new businesses fail in the first year and 95% fail within 5 years.
No. That would make 100% of new businesses wanting to be profitable within the first 2 years.
Every new business wants to be profitable :). Personally, I don’t put much stock in business plans.
Well i business plan is good when you need to talk to other people who has some knowlage themself. And it is also good for planning your company.
Profitable is not the right word, however Successful is the right word. You will get profitable within 8/9 months, but that would only be low. After 2/3 years you could get successful
Hello,
I dont know about other businesses. But if you are doing a business, getting the profit figures early on with a solid base can do wonders to your morale and interest in growing the business.
I prefer to start small with minimum costs and make profit as early as in the first half of the year and then scale it up following by a scale up in profitability.
Actually how soon your business is profitable depends upon you, your strategy and your ambitions.
Abhishek
It varies widely accross the board. Amazon took years to be profitable, and even the it still varies quarter to quarter. Some biz’s can show a hard profit almost immediatly, some never do.
It also depends on whether you are counting your own salary or not. Many businesses are not “profitable” while the owner takes home a healthy six figure salary.
I am my only real (and paid) employee. I tend to count my salary as profit in my own mind. In that case, I was profitable the very first month I started my business.
Business plans usually show a profit to qualify for capital, loans and credit, etc. at the outset. Many people run there business to intentionally not show a profit, for obvious reasons.