Dear Startup: Your Goal is to Make a Profit, and Here’s How

Many people want to start their own business. But I’ve noticed that quite a few of would-be entrepreneurs don’t always have realistic expectations. Many hoping to “get rich quick” are often quickly disappointed.  Some people then give up too early because they have unrealistic expectations and no true profit motive.

The old adage, “If you build it, they will come,” doesn’t apply here. You must do more than that. Businesses just don’t work that way. It is absolutely essential that your products and services add value to others, whether that is saving people time or enhancing one’s health or appearance.

You are in business to fill a need and in exchange for doing that well, your goal is to make a profit.

Why Profit is Essential

I’ve met dozens of entrepreneurs in the past decade, and for the successful ones it’s all about the numbers.

If you’re launching or running a for-profit company your immediate goal should be to make as much profit as possible while adding the highest amount of value. This is a key part of your venture’s success.

Your profitability will depend on the type of business you start.

For example, if you’ve just launched another Silicon Valley tech company, your break-even phase can last anywhere from three to six months or more before you start to make a return on your investment. Don’t dismiss making these calculates up-front and risk running out of capital to sustain your venture.

How to Become Profitable

How do you know if you’re profitable?

Every customer has a long-term value. If you can acquire a customer for less than the long-term value, you’re technically running a profitable campaign. However, if it takes longer to break even, then you will need more capital to acquire more customers until you do turn a profit.