Dec 28, 2012
Why you decide to start a business of your own matters almost as much as what kind of business you start.
"Raise your hand," I said to the audience, "If you started a business, or want to start a business, because you want to follow your passion, to live your dream, or just to do more of what you love."
Almost everyone raised their hands.
Then I asked, "How many of you started a business, or want to start a business, because you want to get rich? Not rich in spirit, or rich in a non-material way, but rich rich?"
Almost every hand stayed up. Some people even cheered. (If the audience had been holding up lighters and mobile phones I would have felt like Bono except scrawnier, less charismatic, and less socially conscious.)
Nearly everyone hoped to follow their passion, live their dream, do what they love, and get rich. You probably do, too.
Is that realistic? For most of us, the answer is no.
When you start a business you have two basic options:
Option 1: Start a business to hopefully do a lot less of what you don’t like and a lot more of what you love.
Option 2: Start a business that will (hopefully) generate significant income.
Sadly, these two options tend to be mutually exclusive–unless what you love to do is grow a business.
Why? We are all special in our own way, but most of us will never truly beat the odds. And that’s okay. Only a few people operate at the extreme edge of possibility.
If you’re a chef and you open a 40-table restaurant, your success will always be limited by price, number of sittings, and a few other basic factors. Even in a best-case scenario you can only make so much money.
The only way to generate more income is to expand: more locations, more employees, more investment, more everything.
But most entrepreneurs don’t think that far ahead. The idea of following a passion is so exciting, and falling prey to the "I will be the one person who does what no one else can do" syndrome is so easy, that many entrepreneurs forget to do what I call the satisfaction math.
Will I enjoy the satisfaction of my business (or career) enough that I will be happy with the income I can realistically expect to earn?
Here’s an example. Say you love landscaping so you want to open a landscaping business–and you want to make $500,000 a year. Hmm: According to salary survey sites an owner/operator of a landscaping business can expect to make between $30k and $90k a year.
That’s good money but well short of $500k. To get to that level that means you’ll need multiple locations in multiple markets. And that means you will be able to do a lot less landscape design and implementation, if any, since you will need to focus on running the business.
That leaves you with a choice: make less than you hope and do more of what you like, or make closer to what you hope and do less of what you like. Unless you somehow manage to fall at the extreme edge of possibility, you won’t be able to have it both ways.
Food trucks is another example. Lots of food trucks have popped up in my area: mexican food, grilled cheese, coffee, donuts–they’re everywhere. If what you love is making food and interacting with customers you’re in heaven. But if you want to make $500k a year you’ll need multiple trucks, dozens of employees, etc. You’ll have to run the business, not run a truck.
As entrepreneurs we don’t tend to do the satisfaction math, though, because our hopes and dreams get in the way. Even if we do consider the financial and practical realities we secretly hope we will somehow be different: We’ll be able to do what we love and get rich.
For most of us it won’t work out that way. That’s why, if your goal is to follow your passions and dreams you should choose option 1: Do what you love. Just make sure you take the satisfaction math test and feel content with the income potential–otherwise you may eventually grow to resent what you once loved to do. Determine the point where doing what you love and earning what you want intersects. Then live your dream.
If your goal is to get rich, you’ll probably need to choose option 2: Build, grow, and run a business empire–and live that dream.
Want to choose both? Go ahead: Just make sure you take the test and determine the point where the income you hope to make and the enjoyment and satisfaction you hope to feel intersects.
Which option is the right option?
As with everything, the right option is the one that’s best for you.