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Explain to it to me like I’m 5 years old. (alien.top)

submitted 2 years ago by BayouPelican@alien.top to c/entrepreneur@indiehackers.space

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I was listening to a podcast about FreshPet dog food. The owner said they have yet to turn a profit. Can some explain to me like I’m 5 years old how a business can run without making profit? How do they pay their bills? How do they pay their people? How do they buy ingredients? How do they pay their personal bills? I just can’t wrap my mind around it.

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[–] Firendly_Bird@alien.top 1 points 2 years ago (1 children)

It's puzzling why no one has addressed this, but the most prevalent reason is that the entrepreneur made a substantial initial investment to kickstart the company. For instance, let's assume an investment of $100,000 to develop the product and establish the office. Even with a 30% profit margin, the business is indeed profitable. However, until that initial $100,000 is recouped, the entrepreneur isn't technically generating a net profit. Nevertheless, since the business is profitable, it's merely a matter of time before they begin to see actual returns.

[–] BayouPelican@alien.top 1 points 2 years ago

Thanks. So basically until a business makes back the investment it isn’t profitable. Hypothetically, if FreshPet got a $100,000,000 investment, they are not profitable until they make back that $100,000,000? Then any extra money made above expenses would be profit?