This is one question you need to know how to answer before you start your business. It is not enough to start a business and hope that people will buy what you are selling, you need a concrete plan for how you will finish your first year in profit. This will create a strong foundation so you can continue to grow your business in the second year and beyond.
10% of startups in the UK do not make it past their first year in business. More than 50% do not make it past 5 years. Having a strong plan for your profit will help you beat these statistics and stay in business.
How Much Money Do I Need to Make During My First Year in Business?
This varies significantly based upon the type of business you run and your personal finances. If your business is something that you are running as a side hustle and has very little initial costs, then your financial needs may be lower than a business where you hire staff and have to rent a space.
To calculate how much money you need to make during your first year in business:
- Write down your costs
- Calculate your wage
This is how much you need to make to break even.
From there, you should create a profit goal. This is a mixture of how much you want to make and what you realistically can make. Many people want to make 6 figures in their business. If you already have a large following who are engaged and likely to buy from you, this could be realistic. But if you are starting from complete scratch, this is very unrealistic.
As a simple exercise, calculate the profit you make on the products or services you sell. How many would you have to sell if you wanted to hit 6 figures?
It’s not an impossible task, and we encourage all entrepreneurs and new business owners to reach for the sky. But if you do want to hit 6 figures then you need a game plan for how you are going to hit the number of sales you need to make it happen.
How to Plan To Make Money For My New Business
The best tip we can give new business owners making a profit plan is to stay flexible. Make an initial plan, but during your first year in business, you should review it every quarter and update it based on what is actually happening in the market. While you should have done a little bit of research before starting your business, you may find something different once you are in the market. Your advertising method might prove unsuccessful or a product unpopular. Startups should stay flexible and ready to pivot as opportunities arise.
Brainstorm a little bit before writing up a plan for how to make money. Answer these questions:
- How much profit do I want to make? (Realistic target and an ambitious target)
- How much profit do I make per unit/ per service?
- How many units/ services do I need to sell to reach each target?
- Which months do I predict will be my busy months?
- What types of advertising do you think will be most successful? How much will it cost?
From there, make a month-by-month plan of how many units or services you need to sell and how you will sell that many. Think of campaigns you can run and how you can get that many sales on the board.
Analyse Analyse Analyse
Once you have launched your business and products or services, analyse your sales. Work out which types of advertising and which ads are bringing in the most money. Conduct AB testing to trial different types of ads or different places to post ads to see what is most effective. Break your sales data down into the smallest pieces to work out how to advertise effectively. This could be as small as which day of the week your ads are most successful or even what time of the day. Use this data to double down and spend your advertising budget on what works. You could even identify what your most successful product or service is and go all in advertising it. You could create related or similar products to try and cash in on upsells and add-ons.