Call me old fashioned, but the purpose of a business is to turn a profit. No matter what kind of company you build, or how much loss you pull over the course of the company’s growth, the company has to be able to generate a profit eventually, and that alone is the sign of true success.
Starting A Business Costs Money
Starting a business typically involves some costs, usually in the form of investment and operating costs.
For example, in the case of an app company, the initial investment would likely be for computers and furniture; while the operational cost, would be rent, salary, etc., which is recurring in nature. If an entrepreneur is able to earn a sufficient amount of money to cover the cost of operations, he/ she has reached operational break-even. In other words, the entrepreneur no longer needs to invest additional money just to keep the business going. When he/ she is able to recover the upfront cost of investment as well (i.e. computers, furniture, etc.), he/ she would have reached business break-even.
Quite often, the price of the app is low, say Rs. 100. As shown above, if the monthly operating cost is Rs. 100,000, the entrepreneur would need at least 1,000 downloads each month to reach operational break-even. If the app is downloaded more than 1,000 times each month, the business is operationally profitable.