Published on August 29th, 2017 | by Jose Vasquez0
What Are the Main Hurdles That Keep Startup Tech Companies From Being Profitable?
These are some of the biggest problems preventing you from being profitable.
No matter how good your business idea is, it can’t be a success unless it’s profitable. Profitability means you’re making more money than you’re spending, which means you can fuel further growth, pay yourself a salary, or donate that money to a worthy cause (depending on the intentions of your organization). Unfortunately, many startup tech companies end up failing simply because they haven’t found a profitability model that works for them–despite having a great concept fueling their momentum.
So what are the main issues that prevent a startup tech company from becoming profitable?
- Pricing issues. First, you might have a problem with your pricing. Setting prices is one of the most difficult decisions you’ll make as an entrepreneur; too high and your customers won’t buy, but too low and you won’t make any money. Experiment and do your market research before firming up on a price for your core products and services.
- Scale issues. Some startups work better when they’re small, while others work better when they’re big. If your model is only profitable when you have a significant number of users, your early stages are doomed to cost more than they make. Finding a way to bridge the gap becomes your top concern.
- High operating expenses. You could simply be spending too much money. If you’ve hired too many people, or if you’re overpaying for things like rent or raw materials, you could easily price yourself out of the market. It may be hard to cut costs, but you’ll have to if you want the business to survive.
- Lack of consistent revenue. You may be making money, but on an inconsistent basis. One month may be spectacular, but the next is dry. This is usually a problem with user consistency; your user retention numbers aren’t good enough, or you aren’t using a pricing system that encourages frequent purchases.
- Growth issues. You could also lose profitability when dealing with a growth issue. Growing too fast and growing too slowly are both potentially problematic, so you’ll have to opt for a calm medium between the two.
These are some of the most common issues preventing startup tech companies from becoming profitable, but they aren’t the only issues. If you need help nailing down a profitability model, securing early revenue, or just coming up with a better direction for your business, contact me today! We’ll sit down and hammer out a plan that can get you where you need to be.