Sometimes, you would think that what is even the use of having a tech startup that is not bringing in profit to you. I’d say it is of no use. This is because as a startup founder, or an entrepreneur as you would call it, you are supposed to be self sustainable, and if your startup isn’t doing that for you (by reaching the point of profitability), then what exactly is it doing?
After the creation of your startup, the next most important thing aside from serving your customers right (you shouldn’t place money above that), is driving your startup to profitability. This could be a very strong source of concern for founders if it isn’t coming as fast as expected, which then breeds the question, “when should your tech startup reach profitability”?
Let me quickly make it clear that I cannot pinpoint a particular timeframe your startup should have used before it breaks even and starts pouring in profits because it is relative to a whole lot of things. Your tech startup profitability could be relative to the kind of startup you run, what your startup capital was, and your funds management skills too.
The kind of startup you own
Your startup profitability is largely dependent on this factor. The kind of startup in question could either be a solely internet startup where all your customer service and satisfaction can be done from behind a laptop screen, or you would have to get involved in maybe delivery of goods and services to customers. These are two different perspectives.
While it is likely that the former (internet startup) would reach profitability first because it consumes lesser costs, the latter which tends to get physical would surely absorb relatively more costs and wouldn’t reach profitability on time.
Your startup capital
How fast your tech startup reach profitability could also be as a function of your startup capital. How large or how small it is. A startup capital, or investment could dictate the pace at which many needed things that could be pivotal to acquiring more customers (which would lead to profitability) are done. Things like proper digital marketing.
With the right marketing, your startup could be piloted to profitability real fast, as it would help get new customers for you. This is a function of your startup capital. If on the other hand, your startup capital isn’t enough to cater for these needs, the speed to get to profitability would be limited.
Your funds management skills
What do you spend your tech startup funds on? Is it on frivolities that the startup might not need, or on the actual needs. Your funds management skills also speaks a lot about the kind of investor you are. Do you invest the startup funds on long term projects, which you shouldn’t expect a profitable return anytime soon, or a short term one, which should be profitable for you as soon as it can. Either way, you’d still make profits, it’s just the time frame.
The big question:
When should your tech startup reach profitability?
At the beginning of this post, we said this was relative. Yes, it still is but we would try as much as possible to take it from an average point.
Personally, I would give my tech startup at most two (2) years to start bringing in profit. If it does not after this set date, then I’d start checking myself especially my funds management skills, or maybe seek for investment to boost.
I’d review where I spend money on, if they are frivolities or not, how good has my marketing been, has it been worth the money spent on it, and many more questions like it. I know this is from my personal point, but I’d like to know yours.
At what point do you think your startup should reach profitability? Please be specific in your answers.