I'm doing a business plan for a web business, and in the financials part, I'm getting this:
Year 1: ($234,788)
Year 2: ($2,361)
Year 3: $251,708
Year 1: -421%
Year 2: -1%
Year 3: 33%
What do you think?
Is it normal to get profits only in the 3rd year?
Depends TOTALLY on your business. Seriously. If you take 1 year to develop your poduct - where do you think revenue will come from? If that is a consulting business or has a product.... why no income?
There are businesses that took 10 years to build something (tunnel between europe and uk). There are others profitable first month (consulting heavy or having a product).
So, this question can not be answered in general.
You should clarify what is the meaning of "profit" and "cash flow".
A business can earn negative profits in first years, it's normal. Nevertheless, you shall plan and maintain a positive cash flow (cash balance) every single day. That means proper funding (equity inflow, grants or loans).
Like NetTecture says it depends totally on your business - there's many web businesses took years to break to profit, others profitable from almost day one.
What you also have to bear in mind is business plan / financial forecast is frequently far better labelled "wild and crazy guesses". 3 year plans are almost always off.
So a better way of looking at it perhaps is how does this affect you?
What can change in two years?
Can you handle the year 1 scenario of $1/4m loss?
Have you run a worst case and expected case scenario?
Have you run a SWOT analysis also?
Mine looks similar, although the numbers are larger, but we are profitable in Year 3. Theres a lot of hiring though in between.
No, that's usually a bit early.
It varies a lot though, and is usually proportional to the size of the organization overall (ie: larger orgs take longer to reach profitability as a rule of thumb).