The sales, or revenue, range of start-up businesses is too vast to develop a meaningful average annual figure, and there is no means of compiling such an average. There are no reporting requirements for entrepreneurs or small businesses to disclose annual sales publicly, so the collection of information is voluntary and may not be accurate. Annual sales revenues depend on a start-up company's industry, size, product, objectives and market.
What is a Start-Up
Even the term "start-up" has different meanings. To a venture capitalist, start-up capital is one step beyond seed stage capital. A start-up may not generate any sales or revenue initially. A company may be several years old and still be considered a start-up, depending on its projected runway in its business model. An entrepreneur, or small business person, may interpret start-up to mean a business in its first year.
Objectives
How much a start-up business brings in depends on the objectives of the entrepreneur. If you're starting a high tech company with a ready-for-market product, your sales goals may be in the millions of dollars by the end of the first year. If your intention is just to earn enough to supplement your day job, revenues may be just a few thousand or a few hundred dollars a month, or even less.
Industry
Different industries have different sales potential and timing of those sales. Companies that require FDA approval for their products may not have any sales for the first year while clinical studies are being conducted. Businesses that are still in the prototype product stage may not generate sales either. On the other end of the scale are Internet companies such as Groupon, which achieved $30 million in revenues in its second year of business. Although Groupon reached $644 million by the end of the first quarter of 2011, in its third year, it has not yet achieved profitability. It lost $117 million for that same quarter.
Size
Size matters. Establishing a start-up company that requires employees will most likely generate more revenues than a one-person company. The amount of money invested in the company also affects sales. If you have funding that limits you to a bare-bones inventory of products to resell, you'll have less in revenues than a company that has greater available funds. Funds also affect the terms you offer customers. If you don't have the cash flow available, you may not be able to offer 90-day payment terms to your customers. That puts you at a disadvantage if your competitors are able to offer better terms. Providing a service such as freelancing, graphics design or running errands has a limit on the sales because there are only so many hours available to work.
Product
The price of products impacts revenues. Companies with high-priced products will inherently have greater revenue, since each product sells for more. For example, if your start-up company is a new car dealership, each sale results in revenues that typically run to $25,000 or more. A new craft business selling embroidered baby clothes may have to sell thousands of items to reach $25,000. The offset is that the profit margin on the new car may be substantially less than on the baby clothes. The craft business may end up being more profitable than the car dealership.
Market and Marketing
The size of the market, the targeted customers, and the promotional programs affect sales. Franchised start-ups have a built-in market, co-op advertising, sales programs and assistance from the franchiser. The franchiser has a vested interest in the success of its franchisees. The more product the franchises sell, the greater the income is to the franchiser. A franchisee pays for that assistance through a licensing fee and a percentage of revenues every year. A billion-dollar market has more potential for sales than a small niche market, but the billion-dollar market may have substantially more competitors than a smaller niche market. For any size start-up business, letting customers know about the products through promotional programs such as advertising will almost always result in more sales than a start-up company that doesn't advertise.
Tags: start-up company, company that, first year, able offer, baby clothes, billion-dollar market