How long to Profitablity?

[VX7]

I am curious to know how long after starting your engineering businesses that you started seeing profits on a regular basis...Thanks.

 

[Theophilus]

I think you'll find that question a bit too broad with answers difficult to find useful. Do you mean profitable, as in more than merely breaking even? If so, with what sort of personal salary?

My business was profitable almost immediately--but I was earning near half of what I earned at the job with which I was formerly employed. My expenses were very low until I was able to make bigger purchases (computer, software, etc.), so I tried to grow as fast as business would bear.



Jeff Mowry

http://www.industrialdesignhaus.com

Reason trumps all. And awe transcends reason.

 

[bvanhiel]

I agree with Theophilus. You should be immediately profitable if you are selling consulting services. The profits might not be as high as what you'd like to replace a salary, but if you're not in the black before taking out your cut then you're doing something wrong.

-b

 

[michfan]

You should make a profit from the start if you work from your home and keep your office expenses to a minimum. The use of your home office (if used solely for the business), insurance premiums, office supplies, etc., and the business use of your car are business expenses that are taken off your income so while you may not look like you are making much, you probably are making more than what your 1040 indicates at the end of the year.

If you rent office space, hire a secretary or cad person, etc. you probably won't see a profit for a while.

I guess I would have phrased the question as "(1) what expenses did you incur at the start and (2) did the fees you were charging/jobs you were awarded cover those expenses?"

 

[VX7]

Thank you all for your feedback. By profit, I meant after expenses (including salary). Also, I assume salary to be equivalent to what you were earning before going out on your own.

 

[michfan]

There are a lot of interesting statistics on the Small Business Admin website. I think it's

http://www.sba.gov.

90% of small businesses fail in the first year and 50% fail within 5 years, I think I read? I'm guessing that lumps service and product businesses (say, a plumber vs. a retail store) in together - it would be interesting to read how just the service sector does.

And making the same salary you are currently making is certainly ambitious! Again, from the SBA website, most businesses don't profit until their 3rd year of operation. I'll have to see if they give a statistic for service-oriented businesses only. That would be interesting to learn that number.

 

[Theophilus]

I agree with michfan--seeing what you're hoping for within a year is very rare. I wouldn't count on it. In fact, people seem to count on it all the time, and they make up most of that 90% because they spend their money before they know how to make it. The money gods won't smile on that sort of behavior. It's best to stay humble, clear out all extraneous expenses, and do your best to survive.

Do you have any clients or gigs lined up? By the time I left Dilbert Company I had a client available who helped me greatly in making the leap--so I had plenty of work to do.



Jeff Mowry

http://www.industrialdesignhaus.com

Reason trumps all. And awe transcends reason.