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So you want to start your own business, but do you have realistic expectations about what you can achieve? In the end, it is extremely important for any business to make money because the main goal of any business should be to do just that: make money.

Most people give up too early because they have unrealistic dreams for their business. The old adage, “If you build it, they will come,” doesn’t apply here. Businesses just don’t work that way. It is absolutely essential that your business adds value to others, whether it’s saving people time or enhancing someone’s health or appearance.

The Point of It All

Whereas a nonprofit’s goal is to pursue a purpose and add value, any for-profit company’s goal should be to make as much profit as possible while adding the highest amount of value. You don’t have to be a math whiz to get this concept, but this is a key part of your venture’s success. I’ve met dozens of entrepreneurs in the past decade, and it’s all about the numbers for the successful ones.

For any new venture, how profitable you are going to be depends on what type of business you want to start. If you’ve just started the next 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.

Turning a Profit isn’t as Simple as It Looks

At the end of the day, your customer has a long-term value and if you can acquire a customer for less than the long-term value, you’re technically running a profitable campaign. If, however, it takes longer to break even, then you need more capital to acquire more customers until you do turn a profit. The key is to be smart about how you market in order to lower your cost per acquisition, while also having the proper upsells and cross-sells to make a quicker return on your investment.

If you’re profitable from day one, that’s a huge sign that you’re doing things right. On larger campaigns, the goal should be to have a profit margin of at least 15-30%, depending on the scalability of the campaign. The goal of any business should be to break even as quickly as possible, and you can do this more quickly by keeping your venture as lean as possible.

Turning a Profit Can Actually Be Impossible

On the flip side, there are always a few key signs that indicate that a venture will never make money. One, it could be that the market isn’t big enough or your target demographic just doesn’t want your product or service. Two, your cost per acquisition may be more than what you need to be profitable, or you’ve exhausted all major forms of traffic. Three, if your competition can’t make it work, then you probably can’t make it work, either. Four, perhaps you’ve lost your passion in this particular venture, or it’s not turning a profit soon enough.

In the beginning, you’re probably going to burn through some marketing dollars to find the right channels to make your business work. The beauty is, once you find the right ones that keep working, the hard work is done. Remember, if it doesn’t work, move on, and if it does, then you have yourself a nice cash cow.

Published on July 6, 2012 on yfsentrepreneur magazine | IN PERSONAL | BY PETER NGUYEN