When should a start-up expect profit?
For any startup to gain profit, there is a certain period of incubation, or nurture preceding, which is the period of investment without any immediate return or profit. Most of the business guru support the Three Year Rule proposed by Milton and JD, the founders of Transoft Solutions. Why it has to take three long years is something that has rarely a valid explanation but it seems to be about right, based on numerous observations of people that start out to create a business and how long it takes them to gain enough momentum that they can confidently say their venture is on the way to being rock. One-man doctor’s clinic, Boeing and everything in between. Three years. Sometimes a little less, sometimes a little extra.
The first year gets invested in the process of building and re-enforcing the proper institutional setup and delivery mechanism to ensure a fool proof and satisfactory service to the consumer. There will be several changes, addition and nullifications in your business model, until you reach a final way to work. This is among the most challenging phases for any start-up, where you will be facing lots of financial, social and psychological retarders, occasionally making you re-think about the correctness of your decision to start-up.
The Second Year expects from you the expertise to build trust among the consumers through your expertise. It’s all about building relationships now. Customers buy from businesses and people that they know, like and trust. Lots of challenges, market competitions and failures will demoralize and compel you to assess the genuineness of your effort.
The third year is the last barrier which need to be surpassed to get the momentum going. If undertaken, the fruits of success following this tenure are in itself sufficient to keep the wheel cart going.
These three years are the period of strain and efforts which need to be crossed just like the critical energy or the activation energy required for self-continuation of a chemical reaction. Investing these few years is something for which your future self will thank for ever. Winners are not those who never fail, but winners are those who never quit.