there, i said it. i’m an idealist, a dreamer; i’ve even heard the word hippie. but i also had to be a realist to turn i heart keenwah into a reality. a business can’t get great products into the world, support noble causes, create jobs and do all the wonderful things it could do, if it’s not profitable.
so sharpen your pencil. get your green visor out and crunch some numbers. create a short run and long run scenario. for your first run, costs will be high. you are buying raw materials in small quantities; your packaging runs will be small. the numbers might not look that great, but they still have to have a path to profitability. so create a second model, a long term scenario, when you hit some efficiencies in buying, production, and distribution. what is your gross margin in both the short run and long run? how long will it take to get to the long run? are short term margins high enough to support the business until you get to the long run? be honest with yourself.
then, unfortunately, there are those pesky sales and admin costs. it’s not just the cost of raw materials and production. you need to put food on your own table too. and you have to pay for advertising, marketing, insurance, website maintenance, the list goes on… will your gross margins generate enough cash to cover all these costs?
your time is too valuable to invest in an idea that is doomed to fail because the numbers just don’t work. it’s fun to live your dream, but profitability is key to making a start-up sustainable.
(photo by ravi)