Myth #5 You Can’t be Profitable Your First Year
Yeah, the stats are against this one. If you're weighing your first entrepreneurship endeavor and are looking at pure probability across the board– I can see how you would be nervous. But, I would argue your first company doesn't have to be that way. If you’re nervous about being in the red, let's take a look at how the industry and structure of your startup can impact your levels of profitability. Especially as a young entrepreneur with no disposable capital to risk, these decisions are going to be important in your first endeavor.
I happen to be part of the minority statistic of reaching profitability during my first year of running my own business. If I can do it, there's no reason why you can't. I started as a College Pro Painters Franchisee during college in 2018. I had found myself in a financial predicament. I was completely independent on top of committing to a mission trip called the World Race the following year. Long story short, I knew I needed enough money to not only sustain me over the next 8 months, but I needed to raise $18,000 in order to go on the World Race.
I didn't have an option. If I failed, there was no way I would be able to pay my bills. If I failed, I wouldn't be able to travel on the mission I felt God calling me to. Running my own business was a leap of faith, but that pushed me toward to make it work.
Over the course of the year I gave my company everything I had. Not only was it an opportunity to grow exponentially as a human being, but I also profited enough money to fund most of my World Race costs! Let's take a look at a few key factors that lead me to a positive financial bottom line.
- Little startup capital required. I don't recommend building a yoga retreat center as your first business if you're a young entrepreneur. Why? You've got to put a lot of money down up-front in over head expenses. Rent or real-estate is a huge expense that will take a long time to payback. Yes, there are ways to minimize this risk. However, I'd recommend starting out with a lean industry to gain entrepreneurial skills before diving into something like that. When I ran my painting company, my costs were minimal and I could buy equipment with the downpayment of my customers. I didn’t need to invest in an expensive tech department to build an app. I didn’t need to re-tool a manufacturing facility to create my product. All I needed was a few ladders, paint supplies, a pressure washer, and a cheap vehicle to carry them in. That meant I needed less sales in order to cover these start up costs. Remember, the lower the over head expenses, the quicker you can break even, and the quicker you can start putting cash in the bank.
- Perseverance. I didn’t give up even though I thought about it dozens of times. I can't tell you how many times I cried while painting houses. There were days where I knocked on doors in midwest snowstorms to find possible leads and came up empty. Ive had customers scream at me. I've lost money on a few paint jobs. I put in a few 16 hour days. You're going to live through a lot of things to celebrate and a lot of things that will make you cry. To this day, running my first company was the most difficult thing I had ever done. That might be true for you too. No matter how tempted you are, you CANNOT STOP when things get tough. You have to lean into the Lord and come out stronger on the other side. It you continue on and pivot from your mistakes, you'll see changes in your bank account too.
- Steady revenue stream. I was consistently focused on bringing in new customers and new revenue. Most of us go into entrepreneurship because we’re excited about building or creating something, whether that be a service or a product. However, dedicating a serious amount of time (especially in the beginning) to finding those customers to service in the first place is key. You can’t be profitable if you don’t have revenue.
- Weigh the opportunity cost of expenses. Look for marketing channels that are most efficient for you and your business. They are not going to be the same for every industry and you must test out what works, look at verifiable evidence, and kill the things you are trying that don't work. A lot of businesses start with social media, but the truth is that a lot of businesses aren't going to grow there. For me and my painting company, paying employees to knock on doors in selected neighborhoods was more efficient than paying up signs. You won’t know this information though unless its recorded and reflected upon.
I believe in you. Do the research. Put in the time. Even if your dream is to start a business that is capital intensive, there's a lot of benefits to starting out with a lean business model.
Are you or is someone you know beating the statistic and reaching profitability in their first year of starting up? We’d love to celebrate with you so comment below!