Are fashion companies profitable

Start-up: When should the company start making a profit?

Global companies with billions in sales often seem to boast that they Record losses drive in. It is not uncommon for large companies of all kinds to go with planned loss rates to the marketthat extend over several years. Is the concept of losing money to make money viable on a small scale? There are many models to explore in everyday business life.

Venture capital, credit or equity

Ideally, you don't need a large financial injection to allow your own business to grow slowly and naturally. But not every industry is made to follow this path to corporate success. That said, in almost every industry there comes a point where the expansion capital is required on the next largest market.

Those who have planned really well can pay for a start-up and market penetration completely out of their own pocket. However, this scenario is rarely encountered. For medium-sized companies, the path to self-employment often leads through one Borrowing to the goal. Today there are countless online platforms that facilitate a loan application. With the right collateral, borrowing costs can be reduced. Hence, borrowing is the number one choice for many.

But also Venture capital is a possible route. Here you start looking for investors. However, the financial injections are often accompanied by unfavorable conditions for the company owner:

  • High interest rates
  • Partial sale of the company
  • Strict loan installments

The right Planning for financing a start-up is without question the cornerstone for getting into the black quickly. But it's not the only relevant point.

The goals determine the costs

In order to build a successful company, it must be possible to offer the product or service profitably in all targeted markets. If this requirement is met, there are many other costs.

So it matters to what extent the company is to be launched on the market. Stand at the beginning regional sales markets in the foreground? Or should that immediately national level be achieved? Even will international business taken into account, it becomes increasingly difficult to realize a profit early on.

Because the larger the business platform, the higher the costs for marketing, market research and the establishment of production facilities or personnel.

Good Debt and Bad Debt - Understanding the Losing Business

When Tesla announces that the company has made a loss of two billion dollars, there is usually still cause for joy.

The high sums of money lost are not due to poor money management.

They are often simply a result increased marketing volume or that Expansion of production facilities. Such a deficit is important if the company is to be able to generate high profits in the future. Because if you cannot meet the production demand for the global market, you will never become one positive balance to reach.

It looks different if there are sales deficits due to regular operating costs:

  • Employee payments
  • Material purchase
  • production

In everyday business, these costs must be covered to at least zero by regular sales. If this is not the case, a profitable future for the company is unlikely.

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Profit from day one - it is possible

Small and medium-sized businesses rarely have the luxury of being able to afford a few years without a profit. Therefore, the basic concept must be designed for profit from the start. To be on the safer side, start-ups of all kinds should sufficient capital in order to be able to cover the running basic costs for six months. From rent to staff - once these costs are covered, you can concentrate on making money.

Allow product or service high margins, this is a definite advantage. If a high volume of sales is required to generate a profitable profit, the Focus on good marketing be placed. With a comprehensive Business plan and a good one Share capital It is therefore without question possible to draw a positive balance in the first financial year.

This is how the right marketing mix works

Katharina Grohe has been working in corporate consulting since 2007. She specializes in the area of ​​cash flow management. She regularly writes specialist articles for financial publications.