We were fortunate to be profitable from month 1, seriously. But, we planned for that. Let me elaborate a little. Many people go into business thinking as long as they offer things people want, the customer flow, ie money, will take care of itself. That's not always the case. I've counseled many small business owners through the years that didn't realize how many additional expenses other than product and rent they would have to pay for, and after realizing it, didn't know how they were going to make it. First off, save money to feed the making of money. Meaning, put back enough cash while you're making it at your current job to cover your personal expenses for the first few months of getting your business up and running. For every dollar you profit, decide how much of that should go into a "tax account", a "payroll account", a "supplies account", "overhead expenses account", etc. Next, understand that there is a HUGE difference is having cash flow and actually making a profit. If you only rely on cash flow to keep you afloat, you're always going to be "borrowing" from next month's profits. Take time to figure your ACTUAL profit per item you sell. A great program we use to keep our margins in check is Price-o-matic by Lucky Break Consulting. It includes every expense you have as a business. This program really opened my eyes to how low my profits were......so I raised prices last month significantly, and guess what, I didn't lose any business or have any negative feedback for it. I worried for a year about raising my prices based on my own rising costs because I thought it would scare people to another brand. Then I finally realized, if my costs were going up, all the other brands had to be experiencing the same thing - and they were. I shouldn't have wasted time worrying.
Most importantly, I'd advise you to consult with a CPA before you open your business (or at anytime really) to ask them to tell you what all you need to be prepared for when you run a business. This will be a big help. And lastly, I always tell business owners, Don't let someone's budget determine what your cost will be". And as far as that goes, Don't let your competition determine your price either. Every store is not created equal. If you start your business with the perception of quality and good customer service, you'll build a reputation you'll be proud of, and you will be profitable sooner rather than later.
Good luck to you all! It's always easier to step up than to step down, so keep at it even if it seems tough - it's temporary - I promise.
If you start a business with no money in the bank, it will take you much longer to realize a profit because you'll always be scrambling to pay for the next thing you need. Make it a goal to not borrow from the next month. If the profits at the end of the month didn't pay the expense you had for that month, find a way to cut back and make up for it the next month. The only way you'll ever be profitable is to bring in more money than you spend.
