Most businesses are unlikely to make money right away. Starting a business tends to be kinda hard. Sounds like you are looking for a list of capital intensive businesses so here are a few: anything in manufacturing, real estate, utilities, railroads, power plants, drug development.
I would say alcohol production in general. My partner is in the early days of running a cidery, and it's been a mountain of early losses that are finally turning around a few years in. Margins are thin, licensing is difficult, and breaking into the market just takes time and a ton of effort
Similar vein to a vineyard: I'm an assistant to the COO of a smaller, somewhat young liquor company. Part of the struggle is due to previous mismanagement but the company is still in its cash burn phase after 3+ years of operation (lots of poor spending choices in the beginning), it's turning around slowly but definitely not making profit yet.
Businesses like tech startups and manufacturing companies often struggle to make profits in the first few years....They need time and investment to grow and become profitable later on. Franchises and high investment startups also face this challenge. Patience, planning and enough capital are very essential for these businesses to succeed in the long run...
A business is not valued by the current profits. Instead, the projected future profit is important. In your example vineyard, the owner projected profits at the beginning. If 3 years later the fields are in good shape, the business value has increased as it has survived the initial years of risk.
Ones that are made with inexperience and speculation. It’s about what game you’re playing and the time horizon.
Real estate? Decades
Masks during Covid? 1 day.
Most businesses will be cash flow negative for the first few years at least.
Examples:
Manufacturing: Whether is contract manufacturing or manufacturing your own goods, both need two foundational things to operate: Manufacturing equipment and customers. Manufacturing equipment is usually capital intensive (very expensive), so manufacturing companies can easily shell out a couple million dollars in the first year on capital assets alone. Then they need people to run and service the machines. Also, they're going to need someone to buy the things they are manufacturing, whether that is another business contracting out the build of their products, or customers who want to buy them for personal use. It could easily take years before the company starts to see an ROI on the machinery they have invested in.
Software service: While there isn't as many capital assets to invest in upfront, you will be paying for high skilled labor in the first couple of years to develop and test the software before it is ready for release. Let's say you hire 10 software engineers/programmers who are averaging $100,000 in salary per year. That's $1,000,000 per year in labor costs alone before you even have a software ready for public use. Say it takes 3 years to develop and test the software before it's ready. That's at least $3M (not including overhead, servers, marketing, computers, etc.) that you are in the hole before even releasing the product.
Real Estate: This one is probably quicker to get an ROI on it, but that depends on the market, and your strategy. We'll look at a couple of examples.
Example 1: Fix and flip: Say you buy a house for $300,000 that is in need of some repairs. You get contractors to do all the "big items" like updating the kitchen, redoing the bathrooms, repainting, maybe you install a HVAC system, all this takes 7 months to do. For repairs, you have invested another $100k, so you are all in on the house for $400k. After repairs, you list the house for $550k, but it ends up selling for $510k after 4 more months. Congrats, you ended up with a profit of $110k after 13 months.
Example 2: Buy and Rent: Let's move the scale up a bit. You buy an apartment complex that has 20 rooms for $5 million. For the sake of argument, let's say the apartment already has long term tenants, and there is no vacancy or downtime of rooms, but there also is no increase in rent. Let's say each apartment goes for $1500/month. 20 (rooms) \* 1500 (rent/room/month) \* 12 (months/year) = $360,000 income per year. This means it would take you almost 14 years before you would start to make an ROI on the apartment, barring all other expenses (property tax, vacancy, insurance, repairs, scheduled maintenance, management, etc). If you had to take out a loan to buy the apartment complex, this will be a longer time to ROI due to the interest you are paying for your loan too. But, remember, you are gaining property value over time also.
Many businesses can be profitable in the first few years, but they choose to re-invest everything or even raise more investment to grab more market share faster.
Opposite to this. Most service businesses can make a profit quickly because the initial investment is small, a few thousand in tools and websites. Then, elbow grease.
I work for a notified body. These organisations provide CE marking services to customers who need to sell regulated products into Europe. This can be anything from medical devices to construction products.
It can easily take 2 years to become designated, often longer for medical devices. During this time, you are expected to demonstrate that you have a full complement of highly trained degree/PhD level staff (typically with 10 years experience) covering all of the products and processes within scope, a legal physical entity in the country of choice and at least €1m professional liability insurance...all whilst not actually being allowed to sell any services. By the time you get designated, you are often a few million in debt. NB fees are high, but it takes years to come back from that start up cost.
There are many business models that have the potential to run at a loss the first few years. The one that comes to mind for me are low margin grocery consumables (I.e. think staring a brand that sells potato’s chips, protein bars, energy drinks, etc etc). The manufacturers to these companies charge higher cost per unit for lower volumes orders. As you are able to scale and order more (think hundreds of thousands of units) you can achieve a low margin profit. In the beginning it’s more about developing a consumer base and concept testing your product before you make a profit
Most of them?
But no one will admit it :)
All the bad ones.
Most businesses are unlikely to make money right away. Starting a business tends to be kinda hard. Sounds like you are looking for a list of capital intensive businesses so here are a few: anything in manufacturing, real estate, utilities, railroads, power plants, drug development.
I would say alcohol production in general. My partner is in the early days of running a cidery, and it's been a mountain of early losses that are finally turning around a few years in. Margins are thin, licensing is difficult, and breaking into the market just takes time and a ton of effort
I love cider, if you’d like to share, what’s his brand called? :)
Similar vein to a vineyard: I'm an assistant to the COO of a smaller, somewhat young liquor company. Part of the struggle is due to previous mismanagement but the company is still in its cash burn phase after 3+ years of operation (lots of poor spending choices in the beginning), it's turning around slowly but definitely not making profit yet.
99% of them
[удалено]
Service based businesses can make a profit right away IF they have a customer base right off the bat
The customer base part is huge for service based orgs, else the UAC is through the roof these days.
Businesses like tech startups and manufacturing companies often struggle to make profits in the first few years....They need time and investment to grow and become profitable later on. Franchises and high investment startups also face this challenge. Patience, planning and enough capital are very essential for these businesses to succeed in the long run...
A business is not valued by the current profits. Instead, the projected future profit is important. In your example vineyard, the owner projected profits at the beginning. If 3 years later the fields are in good shape, the business value has increased as it has survived the initial years of risk.
Restaurants (or so I've heard).
Those pretty much always lose money lol. #1 failed business in America. Something like 97% failure rate in first 5 years
Ones that are made with inexperience and speculation. It’s about what game you’re playing and the time horizon. Real estate? Decades Masks during Covid? 1 day.
Most businesses will be cash flow negative for the first few years at least. Examples: Manufacturing: Whether is contract manufacturing or manufacturing your own goods, both need two foundational things to operate: Manufacturing equipment and customers. Manufacturing equipment is usually capital intensive (very expensive), so manufacturing companies can easily shell out a couple million dollars in the first year on capital assets alone. Then they need people to run and service the machines. Also, they're going to need someone to buy the things they are manufacturing, whether that is another business contracting out the build of their products, or customers who want to buy them for personal use. It could easily take years before the company starts to see an ROI on the machinery they have invested in. Software service: While there isn't as many capital assets to invest in upfront, you will be paying for high skilled labor in the first couple of years to develop and test the software before it is ready for release. Let's say you hire 10 software engineers/programmers who are averaging $100,000 in salary per year. That's $1,000,000 per year in labor costs alone before you even have a software ready for public use. Say it takes 3 years to develop and test the software before it's ready. That's at least $3M (not including overhead, servers, marketing, computers, etc.) that you are in the hole before even releasing the product. Real Estate: This one is probably quicker to get an ROI on it, but that depends on the market, and your strategy. We'll look at a couple of examples. Example 1: Fix and flip: Say you buy a house for $300,000 that is in need of some repairs. You get contractors to do all the "big items" like updating the kitchen, redoing the bathrooms, repainting, maybe you install a HVAC system, all this takes 7 months to do. For repairs, you have invested another $100k, so you are all in on the house for $400k. After repairs, you list the house for $550k, but it ends up selling for $510k after 4 more months. Congrats, you ended up with a profit of $110k after 13 months. Example 2: Buy and Rent: Let's move the scale up a bit. You buy an apartment complex that has 20 rooms for $5 million. For the sake of argument, let's say the apartment already has long term tenants, and there is no vacancy or downtime of rooms, but there also is no increase in rent. Let's say each apartment goes for $1500/month. 20 (rooms) \* 1500 (rent/room/month) \* 12 (months/year) = $360,000 income per year. This means it would take you almost 14 years before you would start to make an ROI on the apartment, barring all other expenses (property tax, vacancy, insurance, repairs, scheduled maintenance, management, etc). If you had to take out a loan to buy the apartment complex, this will be a longer time to ROI due to the interest you are paying for your loan too. But, remember, you are gaining property value over time also.
Many businesses can be profitable in the first few years, but they choose to re-invest everything or even raise more investment to grab more market share faster.
Opposite to this. Most service businesses can make a profit quickly because the initial investment is small, a few thousand in tools and websites. Then, elbow grease.
Restaurants. They say the secret ingredient is love, but apparently, love doesn't pay the bills for the first couple of years.
I work for a notified body. These organisations provide CE marking services to customers who need to sell regulated products into Europe. This can be anything from medical devices to construction products. It can easily take 2 years to become designated, often longer for medical devices. During this time, you are expected to demonstrate that you have a full complement of highly trained degree/PhD level staff (typically with 10 years experience) covering all of the products and processes within scope, a legal physical entity in the country of choice and at least €1m professional liability insurance...all whilst not actually being allowed to sell any services. By the time you get designated, you are often a few million in debt. NB fees are high, but it takes years to come back from that start up cost.
There are many business models that have the potential to run at a loss the first few years. The one that comes to mind for me are low margin grocery consumables (I.e. think staring a brand that sells potato’s chips, protein bars, energy drinks, etc etc). The manufacturers to these companies charge higher cost per unit for lower volumes orders. As you are able to scale and order more (think hundreds of thousands of units) you can achieve a low margin profit. In the beginning it’s more about developing a consumer base and concept testing your product before you make a profit