A business, not a hobby: Digging into what it takes for a business to create long-term success.
What is a business? Understood in its simplest form, it’s when these things:
A brand identity
A book of business
(Ideally documented) processes
Intellectual property (usually)
Physical products (sometimes)
…are able to create and market products and services for less money than people are willing to pay for them. That’s it.
Have you heard the phrase “a goal without a plan is just a wish?” Well, a business without one of these components is just a hobby. My clients know that when I speak these hard truths, it’s because I care about them and want them to be able to succeed. No shade and no judgment here!
Recently, a client said “if I went away tomorrow, the business would go with me.” They wanted to give up and felt the weight of their whole business on their shoulders. It doesn’t have to be this way! My response?
“That is true today, but it doesn’t have to be. Right now you have more than half of the things that comprise a valuable business, but if you walked away today, you’d have nothing because you don’t have a business you can sell. I think if you work hard on your business for the next six months and document your processes, you would be able to sell it. If you walk away without doing so, then it’s true you’ll have nothing. Can you tolerate six months of hard work?”
So frequently, I meet entrepreneurs who are grinding away in their businesses, careening so fast they can’t tell up from down, let alone see where they’re headed. And in so many of those instances, they feel like they must be aimed for success, but they’re really headed for burnout and just can’t see it. However, the closer they get, the more they ask questions like “what if I just walked away?” and “is it normal to want to torpedo my whole business?” Yes, these are real quotes from my real clients!
I meet entrepreneurs who are grinding away in their businesses, careening so fast they can’t tell up from down, let alone see where they’re headed.
It doesn’t have to be that way! I wish people would believe me when I say this. Boiled down to its simplest form, a successful business is just one that spends less money than it takes to produce and market its products or services. The problem occurs when a business hasn’t tracked how much that is - it really is that simple!
It’s rare for me to meet an entrepreneur who is feeling this way about their business and who also knows answers to questions like:
What is your unit cost?
What is your profit margin?
What is the cost of your labor?
What needs to happen so you can pay yourself?
I’m constantly trying to figure out how people get themselves into these situations so I can help dig them out - and help folks avoid this fate to begin with. I think there are a lot of factors, and they can be different for everyone. But one very common theme is a lack of financial literacy, and very often, a level of discomfort about money that leads to avoiding it altogether.
I’ve observed that that can sort of work for some people (or at least they think it’s working) in their personal lives, but it absolutely, positively cannot sustain a business long-term, even one with high levels of demand. I worked with a business once who had gone viral online multiple times and couldn’t keep up with demand. People were literally throwing money at them, but they couldn’t keep any of that money because their costs were out of control. A million dollars flowed into and went right back out of their business in one year. They had all of the things in the list at the top of this post, but they couldn’t figure out how to make those things cost less than they were charging for their products. Oh, and they hadn’t filed taxes in several years.
This absolutely does not have to be you. One of the hardest things for businesses that end up in a place like this is that it is so much more expensive to dig out of a situation like this than it is to avoid getting here in the first place. If you are thinking about starting a business, recently started one, or even if you’ve had one for a while, and you don’t understand or are uncomfortable with money, you need to do something about that ASAP. A free, easy first step in the right direction is attending my LEAP roundtable on the second Monday of the month. Register here to take your first LEAP toward entrepreneurial success.
