In the Long Run, Are Startups Profitable?

Grace Holden

Creating a startup is and should be a fun and exciting venture, but the aim of any business founder is for their company to eventually turn a profit. But how long should you expect to wait? Startups are unpredictable and demanding and some can go years before ever seeing a pound in their pocket. However, many startups do eventually become profitable, but it all depends on the type of startup.

What startups are profitable?

Not all startups make the same amount of money and startups that might be trending today, may not be next year. It’s important to keep up with trends and see where consumer demand is right now. However, you should never create a startup simply because it might make you money. Make sure you have a passion for your product so you can connect with your consumers.

●      Online education

●      Beauty

●      Fashion

●      Cybersecurity

●      Healthcare

The startup sectors on this list pinpoint just some of the areas in the market that have high-growth potential. Any type of startup that identifies a gap in the market has the potential to see high profitability!

How much do startup owners make?

Depending on how much money you have available to you, it might be wise not to give yourself a salary as a founder at the beginning of your business journey. However, many startup founders do, in fact, pay themselves. This can make you much more motivated to progress your business and ensures that you have the time to put your everything into it.

It’s difficult to say exactly how much a founder should pay themselves (this depends on cash flow and the size and stage of the startup). Founders of startups with 25 people or less average as earning 60k a year. It should be said that this is only if the startup has managed to get sources of funding. To work out how much you should be paying yourself you can follow this guide.

How long until startups are profitable?

As startup owners, it can be frustrating having to wait for your business to turn a profit. The stories of businesses that have made millions within a few months are scarce and more often than not only leave founders feeling disappointed and dejected. But how long should you have to wait? In 2018, Kabbage found that 84% of small businesses saw a profit in the first four years of operating. A further 68% were profitable in the first year of business!

If your startup isn’t making a profit within this time frame, it doesn’t necessarily mean it will fail. This time frame depends on many factors, including the national economy, market size and what stage your startup is at. However, if your business still isn’t making money at the end of its fifth year, it might be worth looking at your business plan and seeing whether you need to make any significant changes. Connecting with founders of other startups might also be helpful to compare notes and get guidance from those who have come before you!