Defining the average time to profitability for a startup is impossible because different startups measure profitability in different ways. Once you've done that, the hard part isn't over. Your business won't magically find customers and grow—you need to continue to work long hours, strategize, and invest.
So, how long does it take for a business to be successful?
The first year of starting a business will be the most challenging. Small successes may include incorporating, launching your website, selling your first product, and acquiring customers beyond your initial contacts. All of this will lead you to believe that you are getting close to achieving your goals.
And it’s important to note too that about 20 percent of small businesses fail in their first year. So if you made it through year one, that’s a reason to celebrate alone. It just tells you that you are off to a good start. It's like getting straight A's in your freshman year of high school.
It doesn't mean you got into the best university in the world, it just means you did well in your first year.
In your second year, there may be less to celebrate. Success at this stage may involve maintaining positive cash flow. You may need to increase your investments, which will likely drain your savings and leave you in debt. Success in year two becomes about hitting growth milestones—even small ones. If your business is growing, you’re on the road to building a viable company, according to Entrepreneur. Year two is when you should see your client list really expanding.
Year two is when you start worrying about whether you're making the right decision. You start going into real debt. You start seriously questioning yourself. This is the part people are talking about when they say “starting a company is hard.”
By the third year, things get even tougher. Even small milestones will be few and far between. Now is the time to commit to putting in the work, even if you admit to feeling like you're not making any progress. Profitability tends to come a few years earlier than success at around the second to the third year. This could mean hiring more employees, developing new products or services, or even expanding into new markets.
It's not about running a startup at this point, it's about getting ready to operate a growing firm. You must decide whether or not this is the job for which you applied.
Fourth to Sixth Years
The final stage before success often occurs between the ages of four and six. Only then will you start to feel like you know what you're doing. You will have a steady stream of new customers, your brand will be clearly defined, and you will regularly release or update your products and services.
An “overnight success” is usually a company that’s just being discovered after year four. Many businesses that are called an overnight success have actually been around for about 10 years, according to Inc.com.
Instant success is a miracle not a rule of thumb and small businesses shouldn’t look at them as models of growth. It’s more reasonable to expect lots of mistakes and tiny steps forward, or as Forbes puts it, “failing forward.”
While starting a business certainly sounds appealing, without a boss, the opportunity to pursue a passion and turn your ideas into reality - it's not for everyone. Every step to success comes with challenges. You need to ask yourself if this is what you really want. Building a startup is not an exercise in building a company, but an emotional marathon around business milestones.
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