When Do Startups Start Making Money?

A business can be launched in a matter of days. Turning it into a legitimate company, however, takes a long time. But how long does it take to launch a profitable business? The short answer would be that it takes at least four years to be headed towards a real company, and seven to ten years to lead your startup into the success you envisioned at the start.

Although it’s common for a startup to take three to four years to break even, this is not always the case. That’s determined by quite a few factors, including the nature of the company, the industry in which it operates, and the startup's initial costs.

How can you estimate the length of time your startup requires to start generating profits? Before you start a business or launch a new product, you can conduct a break-even analysis to determine how much revenue your company will need to cover its costs and how long it’ll take to produce that revenue.

It’s important to remember that non-profitability in the early stages does not mean the business is not expanding or performing poorly. Some of the world's most well-known startups are unprofitable, while others take years to break even. Facebook for example made its first profit in 2009, five years after its inception. Similarly, Amazon, created in 1994, didn’t begin to make a profit until 2001, and even then, it didn’t generate remarkable profits until recently. What is then their recipe for success? Both businesses concentrated their efforts on expanding into new markets. Since cash infusions are the essence of a company in its infancy, it’s common practice for founders to reinvest profits back into the startup during its early stages.

However, there has been a recent change in young startups' “growth-at-all-costs” approach. Rather than concentrating on growth-at-all-costs, investors are now forcing startups to concentrate on creating sustainable business models and achieving profitability.

Finally, there are no hard and fast rules for whether a startup can become viable. To be profitable, whatever form of company you run, you must create a long-term business plan, reduce fixed costs, and invest in revenue-generating areas. After all, who is that visionary who created a hugely successful business overnight? It’s a success story, not a miracle story. Don’t use that as a reference.