When did you start making profit?

by ktran102. Posted on Sep 09, 2020    10    8


I started my small business of selling greeting cards on Shopify at the end of last year, but didn’t really have time to put into it because i was working 50-60 hour work weeks for my job. I quit my job at the beginning of this year and when quarantine happened, all my job interviews I had lined up were put on hold, so I put all my time into growing my business and decided to start selling on Etsy since it’s a lot easier to get noticed there first.

In 5 months, I made over 500 sales and it’s so exciting! I’ve now expanded to stickers, posters, and custom portraits. I have so many new products I want to add to the store in the next few months, but it is costing me a lot to order wholesale of multiple new products and in return, I have yet to really make a profit. My credit card is acquiring more debt than I’d like, but I’m telling myself you have to spend money to make money.

Do any of you small business owners have advice in whether I should wait to order my new products until I sell more of what I already have in stock? Or should I continue ordering more stuff because I never know which product may be the one that sells so well that I start making a lot of profit? Would appreciate hearing your experiences/advice, thank you!!

[Edit: Thanks for all your advice so far, I really appreciate it! Y’all have made me realize that I’m probably getting ahead of myself. I’ve been wanting to open a shop and share my creativity since I was young and now I think I’m just excited to make all the different products I wanted to, but I think I will slow down and focus on just growing and selling what I have now before adding more stuff to my shop. And yes, it’s true that I don’t have much savings to help me right now because the past few years I was diagnosed with some health issues that made keeping a job difficult so I wanted to try to turn this side thing I did for fun into a possible full-time business someday now that I have the time!]


Comments

SafetyMan35 1

We started off purchasing inventory retail to test our product and fine tune pricing. The first 100 or so units we sold, we broke even on our cost, but it minimized our debt and risk...if the product flopped, we had less than $100 in inventory, most of which we could use ourselves.

We slowly increased our purchases of supplies and inventory...purchasing 250 boxes to get a price break, purchasing bulk supplies. We only started purchasing wholesale (by the pallet for future sales) once we had a viable product. The only time we are purchasing more inventory than we can sell in 12 months is when we are getting closeout deals at huge discounts (We sell a seasonal product, and many retailers will sell unsold inventory via liquidation...something that retails for $3.50 each they will sell for $0.10. We can purchase wholesale from the manufacturer for $2.00. We purchase those liquidations sometimes accounting for 24 months of sales and store it. When you use 30,000 of these products a year, saving $57k on inventory purchase is a huge cost savings.

Aioeyu 1

I'll echo about not spending too much on inventory. Controlling costs is often the difference between success and failure. Having three good products that you sell thousands of is more profitable than thousands of products you sell three of.

Try and avoid a lot of debt, especially early on. Don't spend more than you can afford to lose. My second business was profitable from day one, but only because I learned from my mistakes in my fist business that I lost about $200k on. Second business we started small and grew, slowly at first but then fast. Our fist year we did about $30k I'm sales, not much profit. Our second year we did about $70k in sales, not much profit. We've doubled our sales every year since, but we still don't turn much if a profit 6 years into business. That doesn't mean money is bad, it just means we're channeling profits back into the business to continue explosive growth. Covid kind of threw a wrench into 2020, so this is our first year without any growth, and the first year we had to take on debt to survive the shutdowns, but we also made the most profit ever because it isn't the right time in our industry to focus on growth. Instead we've been focusing on building client relationships and keeping our employees happy and healthy. But we're also positioning ourselves to make 2021 our biggest year ever, both in growth and profit. Here's hoping it pays off; I think it will based on the last 6 years if operation, but nothing is ever certain.

adamkru 1

If you are lucky enough to make profits in the first few years- you roll that back into the business so you don't really make any profits. Eventually, there should be enough profits to put some in your bank account. Depends on overhead, but for most people - I think this happens in 2-5 yrs. I will suggest my 2 main guidelines for small biz: 1. everything takes longer than you think, and 2. the numbers will keep getting bigger, but the profits will remain the same. Etsy is a good marketplace. For reference, I had 3500 sales in the first 6 months. I would try to find a way not to invest in so much inventory until you figure out your inventory aging and sales cycles. Get a good spreadsheet going. Set your margins. Stick to your numbers. When it's time to liquidate - do it and move on. Good Luck!

LibertyRocks 2

Better question would when were you profitable and cash flow positive. It’s easy to have a net profit but much harder to be cash flow positive to the point where you can safely take a salary while continuing to reinvest in your business.

For myself we were profitable our first year and we were cash flow positive early in our second year but I didn’t take a small salary (think less than minimum wage small) until year 3. Year 4 I took an average middle class salary and year 5 is when i started to bring in top 1% of earners level of salary (mid six figures).

Most other small biz owners I know with successful businesses weren’t able to take a salary until year 3 or so and didn’t make a livable salary until year 5-7. An even larger percentage that I know were out of business by year 5 and had lost money. It’s important to either have a massive nest egg (not feasible for most of us), side hustles during your non busy season, and/or a spouse who works in a job that provides benefits (important that the spouse is totally onboard with doing this for almost a decade and that they understand the possibility of failure is real - this one and side hustles is what I did btw).

cobymoby 7

this can drown you - bloated inventory, especially inventory that you owe money on. it sounds like your are cash strapped if you’re putting things on credit cards, be very careful about what you buy. it seems that your biggest cost in buying inventory and you’re experimenting with what to buy and what sells....

it took me approx 6 years to turn a profit. we had some bad years and we reinvested almost all the profit into the business in the beginning. i lived like a poor person for those 6 years, and now that we are doing better, i still kept many of those frugal habits.

best of luck my friend!

z64dan 2

Yeah if you spend $500 on merchandise but it costs you $300 in interest before you sell it, then that merchandise really cost you $800.

musicmite88 8

Stay the course, do not keep spending on “possibilities” until your profit can handle it. If you have 500 sales use that data to refine what you are currently selling. Up what sells most then if you ‘must’ add something, add something directly related to your best seller so that you can offer it as a related upsell or even pair it with your best seller in a separate listing at the higher price point. Does that make sense?