When to start earning money with a new product/service?

Photo by Austin Distel / Unsplash

TL;DR: As soon as possible! Don’t let other internet services that you don’t pay for or startup myths teach you otherwise: Your goal as a startup is always profitability. The sooner you reach this, the more freedom you gain from it.

Sometimes you need to be profitable earlier, sometimes later. If you aim for a fast-scaling, big-in-the-future, VC-backed startup, you can trade in profitability for faster scaling speed but you still need to earn money with your product from the start to proof that your approach works.
Sometimes founders think that profitability is a switch you can just pull at a specific moment in the life of your startup. But the truth is that finding the right pricing strategy and increasing your revenue until it cover your cost takes a lot of learnings and a lot of time - so starting early is key.

You should also be clear about what profitability would mean for you and what the costs are that you like to cover so you can set your goals right.
To give you a starting point: You need round-about €5k per founder/month to cover your companies expenses at a minimum (your salary, small office, laptop, taxes,..).

Reaching that amount of money could be easier or harder depending on your product and business model:

If you plan on providing (custom-) services for B2B- or enterprise-customers sometimes even one customer could cover your expenses for months or even a year. But the higher the project volume is, the harder and longer is the path for closing this project. Start charging for your services from day one, give a discount in the beginning if you could use this customer as a reference to get new customers more easily and keep in mind that closing a new B2B-customer could take months or even years depending on the size and industry of the company.

If you have a subscription-based business and currently no external funding it's easy to see that reaching profitability with ~10€/user/month subscriptions needs a lot of customers. Try to get your first customers now and check your monthly recurring revenue growth rate and calculate when you will be profitable. Also check what you would need to build a VC-case? How can you think your idea bigger?

If you plan on building a social-network-like product that you want to monetise later using advertising, focus on your VC case, active users and the metrics and proofs you need for that. For that you can also check the Ladder-of-Proof.

Whatever your plan/ your business model is - it normally takes 3-6 months to get your first paying (B2B) customers or secure funding.
You should start as soon as you can with it (meaning now)! Running out of money totally sucks and just kills everything that you worked for so hard until that point!

Matthias Nannt

Matthias Nannt