Is it normal to be losing a lot of money in the initial stages of a startup?
I've started an independent comic book company and have been selling two digital comic books via the Amazon Kindle Store, but have not been making much money. I invested thousands of dollars and have had low sales. Is this a business I should dissolve or is it normal to be losing so much money in the first stage of a startup?
It's very common. However a really smart way to curb the tend is to get some experienced help - commonly assembling an advisory team.
Feel free to contact me directly. I'd love to help.
This is such a common question and problem with startups that haven't planned well. I've launched 8 of my own and they didn't lose money because I started them with guaranteed contracts or confirmed sales in place and this was out of necessity more than smarts back then as I didn't have cash to burn.
Should you dissolve it?
1. Any business, in my experience of my own and 100's of others I consult to, take 3yrs to really gain momentum. Yes, some just go ballistic within a year due to right product, right time, right place but even with these, when you look closely they usually had a few years of experimenting and tweaking. So, if you have only just started this business, then its likely you haven't given it enough time.
2. Should you dissolve it because it is not a financially viable business?
You need good honest answers to the following:
- How many people will realistically buy?
- How much will they spend immediately and over their lifetime with you?
- What is the profit from these sales?
- How much does it cost you to get them?
- How much more do you have or are willing to spend in order to gain the above?
Put these numbers into a spreadsheet and that will help paint the picture and the argument to keep going or dissolve it.
If it is a capital-intensive business then yes, there's not much you can do about .negative cash flow until you can get a customer base built up. Otherwise, not so much - see the Lean Startup literature for how to define a market and get some paying customers before spending any more than you have to.
Since you are where you are - you've already spent the money to make the comics. Consider it as a sunk cost. From here on out, if you start making sales and you are making more on the sales than it costs to get them, then you're in business.
There is always a phase during the initial stages of getting a company started where doubts begin to emerge. They mainly focus on how long can I hold out with no income coming in. There are a few questions you can ask yourself : have I done my research well enough to know others are making a decent living from this type of company setup? What were my expectations in the first place and are they still realistic? What are the other things I could consider doing to get the ball rolling?
Having set up a few companies now I can tell you that it's not for the faint hearted. But I always remember that to reach the best fruit you have sometimes to go out on a limb.
In practical terms I would recommend you draw on your network of friends and acquaintances to provide you with some honest feedback on your venture.
Hope this helps. Dave
Several insightful answers here, but I gave Alan Jackson an up vote for his simple answer. My answer: "yes, it is normal." That is why 9 out of 10 new businesses fail.
I don't completely agree with Alan; you still may have a chance of success, but you can't keep bleeding. Maybe concentrate on paying gigs & give your initial investment / dream a chance to mature without additional funds.
Best of luck
It is common however it is important for you to compile your roadmap (not business plan) to break even and then profitability. You also need to be running low or no cost marketing campaigns to test and measure the interest in your comic books and if there is an alternative distribution channel.
Depends on the Plan you had going into it. If you did not have one, that may be the root of the situation. Content may be King But Planning is The Titan as it relates to Business. I am not saying your content is good or bad, but to get to where you want to go, it is important to put Plan in place that will take you from where you are not to where you want to go!
"Normal" isn't necessarily the right word...but losing money in the first instance is common as you look to give the fledgling business a decent launch.
Think of it like a space launch where they use up the fast majority of fuel to get out of earths gravitational pull...thereafter it's not as onerous.
There are a number of important considerations at start up.
Do you have enough money to properly launch?
Will you spend it wisely to get real bang for buck?
No, it is not a common occurence.
It is important to differentiate between the money that you have invested for start-up costs and your operating income from sales. A start up typically doesn't have the financial capacity to pay operating expenses AND to repay start-up capital. You should not feel defeated if you can't pay yourself back yet. If your business model is strong, then you should be able to set aside cash as your business grows to retire debts to yourself and to others. The money to do this comes from profits.
You need to evaluate whether you are making enough money from operations to continue the business. Your sales should ideally be paying your operating expenses (or at least that is how the business plan should have been set up). If you are having challenges with generating enough sales to cover your regular operating costs, then you need to reevaluate your business model. If you are breaking even, then you might be in decent shape since you are a start up.
I did a some research on your offer and presence. Please take the following in the sense of comity and support for your intent of building a business. (Yes, I do this type of consulting for a living.)
Producing and selling comix is not for the faint of heart and few - very few - make much more than pin money from it. Crafting a good story in comic format is far different than crafting and executing a good (profitable) marketing process.
If you want to build a "real" business, I suggest you attend to a deep dive into the psyche of your target audience. Prepare to address the mechanisms and means to inform them of your "new, exciting, and unique" take on the genre. Create marketing messages that entices them to explore your "take" on story.
At the simplest level of Amazon promotion, the "description", you are missing the opportunity to entise prospective readers/buyers with some "taste" of experience to come. Your logline is weak in my opinion.
I'm no expert but I suspect that your audience is looking for a read that indulges their escapist fantacies, allowing them to use your framework to build their own mind-world to vicariously project themselves into.
I agree with Joanne Tica Steiger, You sometimes spend a lot in startup cash but your revenue should support your operational expenses. If it isn't try talking to other authors on amazon with similar products, see what they have done. Are you on any of the discount kindle book newsletters? Have you tried giving away the first issue and charging for the next. Some people that have 4 or 5 publications in a series give away part 2 and 3 free and then charge for the 1st issue and the others in the series.
Do you have a way within your publication for people to click to the next or other publications in your series? Do you have a website so people can sign up for your newsletter to notify them when you have something new coming out. A lot of authors give away a couple short stories that fill in some blanks and background information about the series in as a reward for signing up for the newsletter or even posting a review of something they have read of yours.
Authors I have talked to say they make as much or more self publishing on amazon as they have in the past with traditional publishers.
I hope this helps a little.
1. I believe you have to define what you mean by losing 'a lot' of money.
2. Over what period of time has the comic book been operating?
3. Did you do any research into the comic book industry and target audience?
If you had, you would have known the amount of start up costs needed and the time frame it would take to break even-point / profitability. Each is different for each industry.
4. Did you test the comic book with your target audience before releasing it to determine if it was something (a) they would be interested in (subject matter) and (b) would they pay for it and how much would they pay?
5. As everyone else has mentioned did you have a business plan in place before launching the publication? I would agree with the others that it sounds like you didn't have one.
6. Did you do any marketing do generate awareness for your comic book?
Bankers hate seeing 'if I build it, they'll come' mentality of start ups. And, just because you built it doesn't immediately mean that comic book enthusiasts will know that you exist.
I would highly recommend that you seek out a mentor(s) who have comic book and publishing experience to help guide you through your journey. One place you can go to find them is your local SCORE (www.score.org) office.
First of all plan is necessary, using plan you lead and operate with chaos but not chaos leads you. Also maybe it was better to examine the best selling channel which can give you back much more money, to be selling in internet book shop you should have great name or digital advertising everywhere in internet especially in the social media for comic books or banners at the comic tv channel (websites) in internet = 1) be mass product and reposted in social media (long strategy) or 2) to be linked with comic famous subject (symbiosis short strategy)
Wish you and your business good luck
Money is sometimes lost in the beginning bjt those who persist can be victorious. So, hang in there:-)
However its not sufficient to write a book and upload it to Amazon. You still need to market it, make your SEO work for you so that "you are found" by your audience.
Amazon is big and great but I think you might also want to approach other portals with the same material. Check out www.dimcos.com which is a new one with great potential. Dimcos is really taking social punlishing to a new level.
It's a stage of startup that tries one's soul. The best way is to explore other ideas channels and turn that cutomer needs into a thriving start-up. When you don't know whether it's just a natural outcome or an omen that the start-up won't be that promising, go back to your business plan and see what are the objectives or the milestones that you set up for your start-up: achieved,not achieved, rethinking is needed.
Hi! Yes it's possible to loose money in the early stages, but you need to review if this was part of your business plan. Losses in the initial years could be part of your projections, before you start making profit.
You also need to review your strategy. Learn from your experiences, till date. Do an analysis of what is working and what needs improvement.
It is also advisable to do a pilot before you actually start anything new.
Best of luck!
No! Remember , work your plan , plan your work. That means you may have to rethink how you are doing your plan. Make some changes.
Sometimes no matter how much you plan. Others plan too. Family, Friends can assist you in your goals . Keep pushing towards your goals.
Having had my share fair of failures!! Keep moving positive and continue to find greatness in you and your dreams.
There's a huge difference between in selling products or services. In the products market you're expected to make a shortfall in revenue whereas in a services industry you should be making money straight off the bat. It all comes down to your COGS vs your invoices.
Your situation is by no means out of the ordinary . Loosing money should have been in you projection for a period of time. . The big question you need to solve for is do I need to invest more ? If that is the case you need to step back and look at the long term view . As I said most start ups loose money it is really about your taste for risk . I strongly suggest you minimize any more dollars and ride out the next few months and see if the nose of the plane comes up if not your first lose is your best lose . Good luck and keep in mind you do not want to pick up pennies when dollars bills are flying over head Best Chuck Green