When will my business start making money

When we talk about money, we are talking about profit and not just sales. While making sales is good, however, until your business starts making a profit it is not yet time for the owner of the business to rejoice, because profit is the only cashable reward for the entrepreneur. 

We shall be building on the topic of the last edition where we said that the business can only make profit is if you have a viable business idea, i.e., an idea that has an established market demand. 

In this edition, we move on to the next most important thing after your business idea. It is called the business plan. There is a popular adage that today’s entrepreneurs ignore with severe repercussions. “If you fail to plan, you have planned to fail”. Preparation of a business plan is a nonnegotiable requirement when you want to start a business. The necessity of a business plan is likened to when someone wants to put up a multi-story building without a building plan. You may succeed in putting up the building, but get prepared for the building to collapse very soon. You can get away with no building plan for a bungalow, because it is very close to the ground and its collapse might not cost you too much. However, from one storey building, you need a good building plan where you have to simulate whatever you want to see in reality on paper first. 

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The same for a business that will stand the test of time, that won’t collapse with the slightest dislocation in the operating environment. While you may not be able to predict all what will happen in any economy in terms of adversity, a business plan enables you to think far into the foreseeable future, as much as you can, and make provisions for how you will react, should market conditions change contrary to your initial expectations. The business plan preparation exercise helps you determine how much you will require at different times in your business implementation journey so that you can make adequate provisions before you set out. Some people argue that you will know how to cross a bridge when you get to the bridge. How about if you get to a bridge too fragile for your 4-wheel drive for someone who drives such big automobile. Then you may have to get down and cross on foot and leave your vehicle behind. 

The business plan enables you to navigate fragile economic situations and circumstances by adequately providing for what you will do, when those times come up. For example, somebody without a business plan would not have done any meaningful competitive survey. Then how will you know how to respond when competitors enter the same market with you or when a new technology is introduced and the existence of your business is threatened? 

The power of the business plan comes to the fore not just when you want to raise money from investors, but in helping you maintain focus on your business intentions. There is nothing as evil as broken focus, when it comes to starting and growing a business successfully. The only tool that will help you keep your attention on what you have planned to do in order to get to where you are going is your business plan. Check why most businesses in developing countries fail within a short time of starting the business. The entrepreneur gives up easily when the first challenge shows up. Due to the fact that he doesn’t have a business plan, he doesn’t know when the business is going to break even. Somebody whose business plan says he will break even in the second year will not pack up the business after 10 months because things are not going on fine. If he started with a business plan, he will persevere and hold on with determination knowing fully well that the business will start returning good money to him if he could just manage to hold on till the second year. 

By KOLA OWOLABI