It goes without saying that every new business starts out small. Even a goliath like today’s Amazon started out small. The United States is home to many small businesses because entrepreneurship is a key part of “The American dream.” According to the Small Business Administration, there are 32.5 million small businesses in the U.S. and according to statista.com, 839,978 new companies started in 2021. Starting a new business is one thing but making a profit and continuing to thrive are central objectives for every new enterprise owner.
Making a Profit—How Long Does It Take
The truthful answer is “it depends.” It depends on the type of business and how much it costs to start up and operate. It also depends on the market and the skill of the owner. For small enterprises with few employees and either no physical property or a small office, profitability can come rapidly. For businesses that require manufacturing or retail space, or that require more employees, profitability will take longer. So, while some businesses can be profitable in six months to a year or two, for most enterprises, making a profit will take two to three years.
What Are the Benefits of Making a Profit
Starting a business can’t (or shouldn’t) be a hobby. The success of any business depends on its ability to continually make a profit. Making a profit is essential because that allows the business to remain in operation, pay its employees, and satisfy its customers. Essentially, if there is no profit, there is no business. Making a profit enables a business to borrow money, hire employees, market its products or services, and attract investors. Making a profit is a critical measure of success for all stakeholders in a business.
How to Start Making a Profit as a New Business
Use these 11 tips to start making a profit:
- Do market research to frame up your business opportunities and challenges.
- Develop a thorough business plan including the specific actions you will take to make a profit and critical goals that you will want to reach.
- Understand financials and the components of costs that you will need to manage, how to establish a profit margin, and how to forecast and manage revenues. Become familiar with the financial statements that your business will need to use.
- Carefully identify your target customers so that you can market directly to them.
- Use effective marketing to gather leads and find more customers.
- Offer products or services that have elements of distinction versus your competitors and add value to your customers.
- Hire well. Great employees can deliver great customer sales and service. Average employees will deliver average or poor results.
- Outsource time and attention-consuming tasks.
- Carefully manage inventories.
- Monitor and control expenses.
- Always track your business progress.
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