How long before you were profitable ?

[kayleeavani]

My husband and I tarted a small business on the side doing something that I love. I didn’t have a ton of start up costs and we are learning as we go . I’m just curious how long did it take until you were profitable? What would u say is average time for businesses ?

 

[primsroses]

@kayleeavani Every industry is different. No way to answer with the info provided.

 

[johnabill]

@kayleeavani I can speak for only myself in this scenario.

I did just above 1.6 million in revenue in 2023. 3 employees plus myself.

In 2019 when I started, I was able to reach profitability in the 1st month. My living expenses were non-existent at the time (I was 21 at the time living with my parents) I believe I cleared just above 2-3 thousand after overhead costs. Mind you I had already spent about 30-40k at this generate enough revenue to have profits. This is very low in my industry, but I was the only person in my company at that time.

Average time is very dependent on the industry, but the main thing early on is overhead. The key is to stay as lean as possible with overhead until you are ready to add it on. Buy things you need as it comes up, don't try to blow all your cash on something that you think you need. I have seen many people spend way too much when they are starting off when they don't need to.

Example: Financing a 40k truck for a Pressure washing side hustle

 

[catwe3]

@johnabill Fits in a geo metro.

 

[johnabill]

@catwe3 I had to google what that was lol

 

[catwe3]

@johnabill Pretty nutty right? What’s your biz btw?

 

[johnabill]

@catwe3 Motorcycle Dealership

 

[catwe3]

@johnabill How do you keep the lights on when you have a ton of inventory? How much of that do you have to sell to even make profit? 1.6 mill in Rev but what’s your cost?

 

[johnabill]

@catwe3 The inventory in this situation is revolving

I'll give a breakdown for you with sample numbers of a smaller scale operation please let me know if it makes sense.

Say for example a location can only fit 30 vehicles max, which at wholesale is worth 200k (6.6k each) apply a 25% margin and the retail value is at 250k (8.3k each)

Sell 10 vehicles in light month, you made 83k revenue, Gross profit: 16.6k.

You rinse and repeat with the cost so you throw that back in to buy more inventory and get it ready.

You pay all other overhead including paying yourself with the 16.6k, which is of course variable depending on how it's structured.

You asked for my costs it was about 1.3 million, our gross profit was about 350k

We are very small for the industry just FYI, I am just sharing my experience. It's "easy" to have high revenue in the millions in the dealership world compared to other industries making the same "take home pay"

 

[catwe3]

@johnabill Not bad take home for all 3 of yous. Is margin competitive or is the MSRP have a markup already included say 25% industry standard?

It’s kind of cool you can slide the scale on inventory versus how much you guys want to move or how much can you. First year in? What’s the other two guys stake?

 

[johnabill]

@catwe3 Our margin is competitive, keep in mind the sample numbers I gave you is just that. Our margin is slightly higher than that not by much but every % matters at big enough scale.

We only sell used so I have no idea about the standard tbh. I’m sure there are plenty that have more and some have less. Some screw people over with death traps that barely run to increase the margin to 40%

I didn’t understand your first year in question

3 full time employees, I’m the owner 100% stake.

As a philosophy I prefer to make less if it comes with less headaches and focus on scaling that concept as much as I can.

 

[catwe3]

@johnabill Oh first year meaning how long has you’ve been running it? Do your employees get commissions? With that philosophy I guess you’d have to really love what you’re doing! Awesome

 

[wanttobefollower]

@kayleeavani Im a year buying established business lost $65k my first year.

 

[rapaputy]

@kayleeavani 1 month

 

[mcpugh]

@kayleeavani Side hustle or hobby business often flounders about because “we are learning as we go” which is ass backwards.

If you learn first, you will get to cash flow positive quicker.

 

[imeldaspoetry]

@kayleeavani Many businesses choose to become profitable at different stages. It depends on your goals, strategies, and metrics

Goals:
Turn operating profits in 1 year.
Turn a fcf basis in 2 years.
Turn a net profit in 3 years.

Strategy: this startegy is saying you’d prefer to grow your business rather than take profits. You sacrifice profits (and paying taxes) for market share.

Metrics:
Gross profit
Operating profit
Net profit
Free cash flow basis

Most businesses prefer to use the money to grow rather than pay profits to investors as that requires taxes (a non immediate expense in the face of a growing business)

You and your husband should decide your goals. Speak with a consultant (check profile if interested) or accountant.

There’s not going to be a business or industry average you want to copy but something that should be aligned with you personally.

 

[charles4u]

@imeldaspoetry yeah this. Accountant or consultant very helpful

 

[0lazuli0]

@kayleeavani about 3 years...the first year was MINUS 47,000, next year was MINUS 9000, third year was PLUS 3,500 (these numbers are all after write offs, depreciation etc...capital was from a HELOC)

 

[johnabill]

@kayleeavani It might help if you tell us what kind of side business you started. It would be easier to give you tactical tips.

 

[tryntodoright]

@kayleeavani These things are usually mostly affected by how you need or want to cut your cloth.

The important thing to remember is you're not riding a business wondering where it's going or how long it will take to pay you back. You are at the reins. You drive that thing. There are bumps in the road but by and large, you're not a passive bystander.

You do the budget, and make sure you achieve it.