Should startups care about profitability? More news at 10

Do new businesses really care about their profitability 💲 💲 💲?

There are certain topics that new businesses tend to forget, either due to unconscious fear or the excitement of starting up, especially those focused on the manufacturing industry in the B2B sector.

One of these topics is the importance of the sales staff and their profitability. It is common to hear someone in a meeting say that a well-known company from across the street is destined to fail.

Let’s get to the point. Consider the following example: if you hire six sales agents with a salary of $120,000 a year, you have assumed an additional $60,000 a month in costs. However, these salespeople may not close new business or bring in a high-benefit client for the company within six months. As a result, profitability will decrease over two quarters, assuming optimistically that growth may increase dramatically from the third quarter to the second year of operation.

Although this crucial detail may seem obvious, it is often forgotten when discussing profitability. Between 70-80% of the costs of most new businesses are employee costs, so perhaps when a company is not profitable, its personnel expenses exceed its income.

According to CB Insights, one of the main challenges companies face is managing labor costs, which tend to be a large proportion of their overhead expenses, especially in the initial phases.

In this highly competitive world, we know that finding the right balance as soon as possible between growth and profitability is crucial for long-term success.

Therefore, when starting a business, we must be aware that:

The initial investment may not show immediate returns, but it is essential to capture market share.

Time. This involves efficient management of the sales cycle, using technology to automate and optimize processes. Methodologies, training, data analysis, and performance reviews to identify areas for improvement and adjust strategies to ensure a prosperous future.

Excessive hiring without a clear strategy to generate revenue can lead to financial problems. However, a prudent investment, sales strategy, and talent can facilitate growth and innovation, eventually leading to greater profitability.

We’d love to hear your thoughts on this topic! How do you balance growth and profitability in your business? Do you have any strategies or experiences to share? Please leave your comments below and join the conversation!