In talking with first-time entrepreneurs I consistently find they optimistically believe they’ll hit profitability six months after launching their product. In my experience, with a couple different ventures, I’ve found that profitability comes a full two years after starting the venture. Let’s look at the timeline I’ve experienced two times before:
- Six months building the product with a key potential customer providing feedback throughout
- Three months working with a handful of non-paying beta customers
- Three months of selling to get the first couple customers
- A year of selling to refine product market fit, customer acquisition model, on boarding process, and at the end, achieving ramen profitable
So, in my experience, the end of year two is when we finally have several hundred thousand in annualized revenue and typically have enough to cover our expenses assuming we’re paying below market salaries.
For entrepreneurs that are bootstrapping a product company, I recommend having two years worth of living expenses on hand when starting the business — it often takes longer than expected to reach profitability.