Many young startups aspire to become unicorns, sold for crazy valuations that set the founders and investors up for life.
The reality is that most startups will fail, and the few that make it past their first five years will take a substantial amount of time to become truly profitable. Surprise surprise: launching a startup and having it take off can be really, really difficult. The time to profitability for startups can be daunting, especially for those looking to achieve startup financial success.
But how long will it actually take for a startup to turn a profit if you were to launch one today? We investigate in more detail below and tell you what you can expect with and without startup funding at play:
Startups often take a long time to become profitable if there are no angel investors or venture capital firms involved in their products or services. This is because they are reinvesting their profits back into the company to grow for a longer period of time, as part of their overall financial model. Uber, for example, did not achieve profitability until 2016, despite being founded in 2009.
So how long does it take for startups to make money?
The average successful startup takes 3-5 years to become profitable. This is a realistic time frame because it takes time to build up a customer base and grow the company. during this period of growth, startups typically have high expenses and low revenues. These expenses can include things like salaries, office space, and marketing. Startups have to keep a careful eye on their bottom line to ensure that they are not overspending.
When the tide has turned and the startup founder can cover all of its expenses and still has funds left over, it is considered to be profitable. But then what happens next? What are the other types of revenue models out there for startups?
Once a startup business idea becomes profitable from different types of startup revenue generation, it can reinvest its profits to continue growing or start paying dividends to shareholders. Some startups choose to stay private and never go public, which allows them more flexibility in how they use their profits and funding options.
Others eventually list their shares on a stock exchange so that anyone can buy and sell them as a way to generate revenue. This offers another set of advantages and challenges that we’ll discuss in more detail in a future guide for business profitability.
As startups mature, their expenses decrease and their revenues increase, leading to profitability.
When a startup is measuring profitability, it might be approached by potential buyers looking to acquire it, or it could pivot into becoming a startup studio that launches multiple new ventures using the funds they’ve raised from its success. It all comes down to the type of business and what the founder is hoping to achieve.
So how do you kickstart the profitability of your startup? Here are a few things you can do to make sure you are on the right track.
There are a few things that can speed up the process of becoming profitable for startups.
First, having a clear and achievable business model from the start can help ensure that expenses are kept under control. Second, starting in a niche market can help focus the company's efforts and make it easier to reach profitability. You want to find a market that is underserved or a problem that you can offer a better solution to.
Finally, having a strong team of experienced professionals can help a startup navigate the early years and avoid common mistakes that can be costly and impact success later on.
Becoming profitable is an important milestone for any startup. By understanding the average timeline and some of the factors that can influence it, startups can set realistic goals and ensure they are on track for long-term success.
Running a startup comes with tons of risks, and those risks are heightened if you have a team that is still green.
An alternative is to work with a team that has proven experience bringing startups and new ventures to the market - and this is where venture studios come in.
NineTwoThree is a digital venture studio that has brought more than fifty apps and fourteen startups to life, working with some of the most unique founders. This is all possible because we have a finely honed team with extensive backgrounds in bringing these projects from concept to completion.
Contact us today to book a discovery call with our founders: we can discuss your project and provide input on the heights it can achieve!
