When Will Your Startup Start Making a Profit?

When Will Your Startup Start Making a Profit?

It can take years to be profitable, but it doesn't mean you're a failure.

By Marcia Smith

If you’re looking to start a business, you might be wondering if you can expect to see any profit during your first year of trading. Whilst profits in the first year are always welcome, of course, they shouldn’t be expected, nor should you be relying on them.

It can take time

The majority of businesses, on average, do not start turning a profit until as late as the third year. Some can take up to five and, of course, some never do. So, while it’s important to know what you need to achieve in order to run a profit, this isn’t the only metric you should focus on.

Making enough to break even in your first year should be seen as a significant success. Consider all the initial, one-off costs associated with starting a business. Generating a profit in your first year as a company, after significantly more outlay than following years should require, can’t be expected. So don’t consider yourself a failure, simply because your costs outweigh your revenues within your first 10 months. You should have a business plan and financial projections. If you’re sticking to them, then you’re looking good already!

No exact timescale

There’s no exact timescale for when you should expect your business to return a profit. This will depend on many factors, including the nature of your business and the sector you operate in.

Many innovative companies with low overheads operating in high growth areas can be profitable almost from day one. However, those in more traditional sectors such as leisure and retail, which typically require a large capital outlay to get off the ground, may take years to achieve profitability.