Many Business Don't make money in their first year. Have You?

[EverythingBlu]

Have You?

 

[johndon68]

Yes, I did.

John

 

[EverythingBlu]

Thats great John, what business are you in?

 

[Carl Mintern]

I made enough to pay my bills in my first year, which was all I was aiming at.

 

[johndon68]

Thats great John, what business are you in?

I specialise in data recovery for users of Sage's accounting software.

John

 

[EverythingBlu]

Great Stuff! I'm hoping for profit in the first year, just at the annoying factor of having work there, gap in the market and customers ready to buy but not enough capital to clinch the deals i have on the table. Fingers crossed.

 

[Pish_Pash]

I covered my food/shelter bills (& kids' Nike trainers) from my first years profit - I don't follow the 'it takes a few years to make a profit' ethos, indeed, unless you've another (serious) breadwinner in the household (or huge stash of cash you can burn), the mind boggles at how you could run with a business along these lines....

Y1....lost a wad
Y2....lost a fair bit
Y3 ...lost a marginal amount
Y4....scraped a profit.

...go figure!

I've never once gone to Sainsburys, where they've said "Have you turned a profit this year? No? No probs pay us when you can"

 

[Andrew Chambers]

I covered my food/shelter bills (& kids' Nike trainers) from my first years profit - I don't follow the 'it takes a few years to make a profit' ethos, indeed, unless you've another (serious) breadwinner in the household (or huge stash of cash you can burn), the mind boggles at how you could run with a business along these lines....

Y1....lost a wad
Y2....lost a fair bit
Y3 ...lost a marginal amount
Y4....scraped a profit.

...go figure!

I've never once gone to Sainsburys, where they've said "Have you turned a profit this year? No? No probs pay us when you can"

Depends on the business. Working from you dining room table and flogging goods over the internet is almost overhead free. Same goes for many service based businesses, so yes they can make a profit in the first year.

Try opening a shop with massive up front cost and ongoing £1,000's of monthly costs and it can indeed take two or three years before a profit is realised. Same for manufacturing. That's why when people post on here they want to open a shop and have £15k to invest they get the " negative" replies.

 

[J Arnold]

Depends on your start up and on going costs. If you have a business where these are low and kept low you should be turning a profit in a few months if not sooner.

 

[Philip Hoyle]

Don't get confused between profit/loss and cash flow.

"Massive up front costs" aren't an expense, they should be spread over their useful lives, so upfront costs of a shop or factory, including buying stock, etc., aren't "day 1" costs to create a loss, they're long term investments, so aren't part of your profit and loss account until they're sold (stocks) or depreciated (assets) or used up (prepaid expenses).

Spending a few grand on advertising and marketing on day 1 has an immediate cash flow detriment, but if it's buying an advertising program spread over 6 months, then you spread the costs over six months.

It's quite possible for a shop or factory to make a profit in month 1. I've just helped a new client start up a small cafe - upfront costs were over £30k, but it still made a profit on day 1 because it's trading income exceeded the staff costs, food, power, and other overheads and 1 days' depreciation of the £30k upfront costs.

Lots of people trot out the 3-5 year turnaround as an excuse for over-spending and over-indulging in the early years. Most of the start up loss making businesses I see are because the proprietors take out too much wages (i.e. more than it's making), can't resist spending on fancy unnecessary premises, can't resist a new lease car, a new Apple computer, etc. Basically, they spend unnecessarily in anticipation of income and as a result just get themselves into debt for no sound business reason.

 

[BustersDogs]

I did (service business), but I already had the few bits of outlay that I needed, a suitable vehicle and crates so I could do groups straight away. It took 2 years for me to be 'fully booked' though. But I started up, then 4 months later the UK went into recession...

 

[Andrew Chambers]

Don't get confused between profit/loss and cash flow.

"Massive up front costs" aren't an expense, they should be spread over their useful lives, so upfront costs of a shop or factory, including buying stock, etc., aren't "day 1" costs to create a loss, they're long term investments, so aren't part of your profit and loss account until they're sold (stocks) or depreciated (assets) or used up (prepaid expenses).

Spending a few grand on advertising and marketing on day 1 has an immediate cash flow detriment, but if it's buying an advertising program spread over 6 months, then you spread the costs over six months.

It's quite possible for a shop or factory to make a profit in month 1. I've just helped a new client start up a small cafe - upfront costs were over £30k, but it still made a profit on day 1 because it's trading income exceeded the staff costs, food, power, and other overheads and 1 days' depreciation of the £30k upfront costs.

Lots of people trot out the 3-5 year turnaround as an excuse for over-spending and over-indulging in the early years. Most of the start up loss making businesses I see are because the proprietors take out too much wages (i.e. more than it's making), can't resist spending on fancy unnecessary premises, can't resist a new lease car, a new Apple computer, etc. Basically, they spend unnecessarily in anticipation of income and as a result just get themselves into debt for no sound business reason.

That's terrible advice, and why so many new businesses go bust. I agree a shop can generate a income from day one, but there is no profit until the set up costs have been recouped. Also only a fool would say their cafe had made a profit on day one, tomorrow they might well make a loss that wipes out the previous days profit. You simply don't look at takings so short term.

 

[SamStones]

That's terrible advice, and why so many new businesses go bust. I agree a shop can generate a income from day one, but there is no profit until the set up costs have been recouped. Also only a fool would say their cafe had made a profit on day one, tomorrow they might well make a loss that wipes out the previous days profit. You simply don't look at takings so short term.

So others may disagree but I would say THAT is bad advice and why so many businesees fail.

Of course you should look at your profit every single day , if not more often. You need to know if you have made money or lost money that day so you can act on it.

The cafe owner who has said they have made money on day one is doing the right thing. Yes day 2 they may make a loss, but at least they know they have made a loss. At the end of the week they can say ok we have made/ lost money this week. They then do the same at the end of the month, quarter, season , year etc.

Without this vital information they don't stand much chance!

Sure from an overall view you need to take into account your upfront outlay but you can't wait till year 5 to work out whether you have made a profit or not! That's just crazy.

 

[cjd]

With small business that's a bit of a piece of string question, 'cos it depends on what you decide to pay yourself. We made a profit in our first year, but only because we paid each other £50 per month. Actually, I worked for free for two years, THEN I got £50.

Telephone companies get a payment for terminating 0800 numbers. After a year, I remember spending our income from them on a Big Mac. It didn't pay for the fries.

 

[kathrinalewis]

Every business needs sometime to grow high in the market and for that you have to struggle and work hard. I am also the one who get success starting my own business in a year.

 

[Andrew Chambers]

So others may disagree but I would say THAT is bad advice and why so many businesees fail.

Of course you should look at your profit every single day , if not more often. You need to know if you have made money or lost money that day so you can act on it.

The cafe owner who has said they have made money on day one is doing the right thing. Yes day 2 they may make a loss, but at least they know they have made a loss. At the end of the week they can say ok we have made/ lost money this week. They then do the same at the end of the month, quarter, season , year etc.

Without this vital information they don't stand much chance!

Sure from an overall view you need to take into account your upfront outlay but you can't wait till year 5 to work out whether you have made a profit or not! That's just crazy.

You're confusing sales with profit. Of course any shop owner will know exactly how much he needs to take in a day, and what his ideal target is. Fast food chains have hourly targets.

Simply you've not made a profit until the start up capital has been recouped. If you simply "forget" about the start up money that's when small businesses go queer, and when directors start paying themselves out of the vat and tax money. Have a look at the insolvency forum for many examples if just that.

 

[HazelC]

I made money in the first year, and have continued to make more money each year from that date

But there were minimal out-goings, there are more now.

 

[AllUpHere]

I think with conversations like this it's important to confirm exactly what type of business we are talking about. Many offering a simple service can make money from day one, where as a 'proper business' can take a great deal of time to actually turn a profit.

A lot of self employed folk think they own a business, when actually they have simply created a job for themselves.