It's no secret that the startup world is strong. Half of the startups fail before the fifth year, and only one in ten survive in the long term. Recent economic trends are not very encouraging either. Last year saw one decrease of 38%. in initial global investments and a 30% discount in the US, specifically. Moreover, of the available funds, a significant amount was swallowed up by fashionable artificiality intelligence startups. So if you're not into AI, the picture might look even bleaker.

Today's founders must come to terms with the fact that the VC funding round they've been working toward may not materialize. Although this has always been the case, the bar is now so high that a plan B is essential – how will your business survive if you don't get funding?

Alternative startup financing is an increasingly popular option, for example, taking out a loan with a traditional credit institution. But this is not for everyone and definitely not for pre-revenue startups, because the bank needs to see how you will repay the loan. Plus, collateral—or the lack of it—can disqualify any software or other startup, since, unlike VCs, banks don't operate on trust.

So if no one is funding you and you don't have a runway to stay on until the ecosystem picks up again, there's only one way for your startup to grow – become profitable.

Connected: The entrepreneur's guide to building a successful business

Why profitability should be top of mind even if you're doing well

I have been actively raising funds for my on-demand consumer packaged goods (CPG) startup since its inception three years ago. First, we raised $1.9 million in seed capital to build the core of our business, which we did – securing the necessary partnerships, putting together a base of operations, developing our software and growing the team.

With a strong foundation and proven business model, it was time to scale and we sought VC partners to help us improve our operations. What I expected to be three to six months of active fundraising turned into a year that rolled into the next year and, to this day, is ongoing.

Despite clearly positive business results and a host of warm leads and cold pitches, investor response was lukewarm. Interest came with terms and homework – “Let's reconnect when you hit these numbers.” But when we did, the poles shifted. Fundraising began to feel like a goose chase, and the increasingly turbulent economic environment did us no favors either.

Right now, competition is intense, and startups that investors would have flocked to just a few years ago may not get a second look today. With this in mind, founders should avoid putting all their eggs in one basket and hedge their bets by approaching growth in a profit-oriented direction.

Because if you don't, you have two equally unattractive options: crash or chain yourself to an opportunistic investor who will pay pennies on the dollar.

Three things a founder must do to be profitable

Four months ago, my startup reached profitability for the first time. It came after more than a year of work and active planning, and that's what it took.

1. Change your mindset

The main job of a startup founder is to raise funds – this is something taught in incubators, accelerators and other mentoring programs. Therefore, a founder's focus is often on pitching their startup to investors, ie finding ways to promote KPI even if it's unsustainable, focusing on design over functionality, and spending heavily on marketing to demonstrate gROWTH.

When aiming for profitability, this should not be taught. Growth cannot be cosmetic, and for many, it requires a change in mindset. Goals and priorities need to be redefined. Forget maximizing records; focus on paying customers; forget vanity measurements; focus on conversions; forget your personal desires; focusing on business needs.

Note that this doesn't mean you have to stop fundraising, but you may need to revise your plan.

Connected: How to finance your business with venture capital

2. Optimize your business

A changed mindset isn't enough – you have to get in the trenches and optimize, optimize, optimize. For a regular business, your runway is limited and if you don't put your balance in the green, then it's game over.

Here's a specific area to pay attention to: startups often focus on customer acquisition and neglect user retention. They'll pay through the nose to get a signup, but invest little to ensure customers stick around, leading to a high profit-killer combination. CPA (cost per acquisition) and a high rate of inhibition.

As my co-founder always tells our customers: “All you need is 100 loyal customers for a successful full-time business.” We adopted the same mentality, going for quality over quantity.

Addressing this was a cornerstone of our journey to profitability. We went to great lengths to understand specifically when and where our customers opt out, and we've made every effort to address their pain points to ensure people continue to use our services. That way, you'll get more bang for your buck for the purchase.

3. Expand your offer

If you haven't been striving for profitability from day one, chances are it will take you a long time to achieve it. In fact, it may be impossible to reorient your business quickly enough. For this reason, it is wise to look for additional streams of income that can support your business while it turns over a new leaf. This can be anything from additional services to new products. For example, My CPG Startup allows anyone to start a side or full-time business selling on-demand supplements, cosmetics, and packaged foods. However, to start selling, our customers need to create an online store where they can direct their customers.

While our customers found our platform easy to use, they struggled to set up shop – so we started offering help with this as a separate service. Essentially, we leveraged our existing expertise to provide e-commerce development services, which was critical in expanding our footprint.