Loading...
Answers
MenuEvery interview with an entrepreneur goes the same. They say there is no money made the first year. What goes on this first year?
This question has no further details.
Answers
Well, I made money in the first year...in the first couple months, actually. I run a consulting business.
The other guys...let's get some definitions going here. They made revenue. Unless they were totally hopeless, they had some cash coming in. But they also had expenses going out.
Manufacturers and IT guys who go into business generally don't know anything about selling. They get an "idea" and go create something, and then have to struggle to get it adopted. So they have to throw a lot of cash out, and then try to rake some back in. This is the wrong order; however, that's what most people do.
That is what their first year is spent doing. Developing the idea, and then finding a market to sell it to. If they fail to accomplish these two steps, they won't last much longer.
Until revenue exceeds expenses, they won't make money.
They're also developing systems and processes, and getting experience. They could be growing, in which case they are probably adding people at a high rate which consumes profits as soon as they come in to pay for the new staff. Fast growth can also easily be mismanaged and cause a succeeding business to crash and burn.
When I took over Springleap, we made money from month 1 and that has never changed.
Let's rather start with this:
Revenue vs profits vs Runway. They're all different.
As a startup you figure out your costs for 18 months and that's your runway. That's what you raise. Thereafter, show how you're going to make capital.
Fact is: some startups don't "make" (turn a profit) in the first year. That's why the valuations are significantly lower. It's not the lack of revenue... it the lack of evidence of market fit. It's the data that's missing which makes the investment super risky. Getting market fit, adoption and validation is always best shown in scalable predictable revenue.
So what goes on in this first year?
Assuming you're not dealing with freemium or community models that are "build it, get them through the doors, get the engaged and then figure it out" - you need to figure out the path to revenue, average lifetime value of a customer and cost of acquiring a customer.
First 2-3 months should be MVP. Thereafter a month or 2 of finding the market fit data. Then agile redevelopment based on A/B testing and surveys. By this point you're 6 months in. The next 6 months are all about poking and prodding to find the scalable model. As my VC pal Eliot from Boldstart says: Build, validate, scale.
Investors classical want to get involved in the scale part unless it's your F&F round, where they're betting on the jockey.
We actually got Springleap profitable in month 2 and 3 - I think Lane Becker would agree that serendipity always plays a part, but heck, we worked super hard and were relentless.
We used a variety of techniques. One of the most effective: get clients to pay for us to develop the things they wanted that made sense to dev for the platform. It's a great tactic: go in. Listen to their searing pains, gaping holes and primary goals.
If your product/ service can service these, offer the dev at barebone costs and put a margin on top for the service itself. Show a huge discount and that you're doing something special for them that you were only planning on doing much later.
Nail this technique and you will get:
1. Case Studies
2. Revenue
3. Testimonials
4. Referals
5. Data
6. Product
Hope this helps. Live long, prosper and build stuff people will use. Drop me a call if you want to pick my brain apart on the matter.
Well, I don't think I have ever not made money in the first year. In fact, I generally make money in the first one to two weeks.
But, I guess what they mean is that entrepreneurs generally reinvest as much money as possible into expanding their businesses in the first year. To be honest, I think this continues well into the 3rd or 4th year.
The speed of profitability is really going to be dependant on the industry and competitive environment you find yourself in.
Related Questions
-
What are the pros and cons of branding under a personal name vs a brand name?
If you are going to lead the workshops: Start with personal branding. Workshops and coaching are by experts and I'd recommend building a personal brand first. People should build trust in you. Then your offerings. Each offering that you have - a workshop, a coaching program etc. - should have it's own branding. You may even have separate websites for each of your offerings. If you are only organizing the business and not going to lead the programs yourself: then you got to do a corporate branding. So people relate to the organization more than individuals delivering the programs. The coaching / self help / personal development / health industry is full of examples of both branding strategies. If you study a few cases, and their business models, you will gain better insights on why they chose their branding strategy. And you can even question if the strategy worked or not. I hope this gives additional perspective to what you are thinking. Feel free to contact me if you want to discuss this further.NM
-
Fact or Fiction? You NEED side a job when creating a business because there is no way to make money for 6-12 months
A startup is in essence the "art" of juggling. Of course you need some sort of "income" to pay for rent, food while your startup or business begins to generate cash flow. Ideally you should have at least 6 months of saving, sufficient time to give you a clear outlook of what will happen with your business. But some businesses start generating cash liquidity at faster pace. What is definetely certain is that you will need "leverage" in order to get your business started: savings, past clients, loans, investor capital, or even grants. Happy to jump on call and explore more :)HJ
-
How do I define a client avatar for people or businesses requiring branding and design services?
What a great question! You are on the right track. First, lets define Avatar as "An icon or figure representing a particular person." In business application, an avatar is a representation of your ideal client/customer. A business may have multiple avatars representing several target demographics. Some prefer to distill this down to one person as an “avatar.” I recently interviewed super entreprenuer John Lee Dumas of EOfire.com and he has a very clear Avatar he calls "Jimmy" that he uses for business decisions you may want to check out. I hope that you have already gone through the exercise of your UVP, or Unique Value Proposition. If not, may I suggest the worksheet on this page, first: http://bit.ly/1kYTLbf Ok, so once you've clarified the why choose me, then start working on your Avatar, that's the who, or as we marketers like to call them: personas that represent segments from your target market. You have to start somewhere, right? So do. Are you going to first focus locally in your zip code and surrounding area? That can be one piece in helping you visualize your Avatar's lifestyle. Target marketing has to do with breaking your potential global audience into segments, specifically only the potential buyers of our product, service, or cause. As much as we might be tempted, we can’t be all things to all people. We have to commit and put some stakes in the ground. Are you ready to write your personal ad? Who are you looking for? Some of the most basic questions you should ask in forming an idea of Customer Segmentation has to do with what these people want, need, think, and feel. No time is wasted from this exercise because it will ultimately lead you to where and with who they hang out (their tribe.) Why is that our desired end point? Because that virtual or real (coffee shop, tradeshow, website, search engine, twitter feed, health fair, street location, podcast, meetup, traditional media) is where I should be hanging out with my product, service or cause and shouting my UVP from the rooftops as part of the conversation! Taking this thought experiment all the way through will also assist you in the critical understanding of whether the segment is large enough for you to be successful. I like using the Personas app (available on iPad) to put forth a visual representation of my potential target markets, but a white board works too! Literally put in a photo representation of your Avatar with a Name, and start brainstorming out: Think and Feel? See? Hear? Say and Do? Hangs out with/where? For you, offering your B2B services, maybe explore linked in to find where your peeps hang out and get a clearer idea of, let's call her, Samantha. Samantha is a small business owner of a growing service business whose revenues just got in the black. She has two employees and she's looking to hire another. She is struggling with getting her website up and mobile friendly and feels like she needs to be more effective in communicating what she does. She is overworked, in her mid 40s and recently divorced with 2 boys ages 10, 12. She has little time for fluff and needs guidance in creating a system that will help run her business. Can you help Samantha? :-) If you'd like to get more tips that sound like this, I'd be tickled if you let me know if Sell Local. Think Global. speaks to you. It's my first book and I'm feeling very vulnerable putting myself out there! eep! Available now on Amazon: http://bit.ly/olgasbookOM
-
We're rebranding our mobile app with a new name and image after 2 years. What should our timeline look like? Are there any pitfalls we should avoid?
Your strategy should encompass at least four components: (A) Complete Visual/verbal/social/technical audit to find/create needed assets for transition: know which assets need to be retired or replaced and what transitional assets are needed to bridge the gap. Prioritize: not everything always needs to change at once and the more you have the longer it will take or cost. Plan to convert brand book concepts/guidelines into tangible or digital deployables: how much "stuff" do you need?; vendor selection; budgeting; designing production files; ordering; quality assurance etc... (B) Internal (team) awareness & asset deployment program and monitoring compliance. (C) External publicity plan: aimed at existing clients & prospects, and any other stakeholders: social networks, media, affiliate partners, etc... Timing should be coordinated with industry / sector calendar (trade shows, if applicable), and major app update for maximum effectiveness. Do you need specialized short term PR/AD help? How can you leverage your 10K+ users to buy in / get the word out? (D) Technical migration & Monitoring Plan: seo strategy & tracking including all affected url redirects, landing pages, email changes, whatever is affected. Monitoring & analytics to see how effective the transition is (compared to old name stats) and when transitional assets can be retired.DC
-
What is essential for the skeleton of a business plan?
1. Lucid understanding of the objective behind business plan development 2. Customizing the content plan (skeleton) per objective 3. Adopting planning the business approach than writing a business plan 4. Knowing "How-To" and "What-If" Hope above to be of some help. Looking for anything specific? Feel free to reach out.SB
the startups.com platform
Copyright © 2025 Startups.com. All rights reserved.