I’m not sure most entrepreneurs started their first company because they wanted to run a business.
Sure it sounds like a great idea, setting your hours, and being in charge of your career. I think a lot of times hobbies or interests become profitable and people begin to question how you can turn your passion into a career.
Someone really likes fixing computers and ends up helping their family and friends, and people start paying them money for their help. Then all of a sudden that small time computer fixer needs to start tracking revenue, doing accounting, taxes, business cards, work phone and email, etc.
Tell me if this sounds familiar?
All of a sudden what was a hobby became profitable, and now they have a full-time business or a sole proprietor job. They realize they have no great way to manage all of these customers, so they begin adding more people to pick up the extra work. Now they’re tracking everything in spreadsheets, but it doesn’t really work well with another person in the mix.
As great as owning a business sounds, most entrepreneurs had no idea of what it takes to run a business when they started one. You may have wanted to make money doing something you love, but now you have to worry about HR, paying salaries, accounting, marketing, and sales.
Well today, I want to talk about all the things you stumble into when becoming an entrepreneur and the obstacles running a business can present.
Breaking your mindset on money
Running a business involves switching your mindset on a lot of things, but one of the most significant differences is how you spend money.
People who don’t own a business have a hard time when it comes to spending large sums of money. It’s weird spending $80,000 on something good for the company when some people make that in a year as their salary. My wife as an RN in the Birthing Center, helping bring new people into this crazy world and makes less than that in a year. However, we will spend that money to go to one big trade show event, if we believe the value will be there.
I think a lot of entrepreneurs treat their company’s money the same as their checkbook. While it’s good to be careful with your budget, you have to remember the money your business makes could be going back into your business to grow your return on your investment further.
Spending a few hundred dollars a month on multiple products is worth it for a business, while an individual could never justify the amount. You have to look at money and ask yourself what you are getting out of it.
If you want your business to grow, you’re going to have to invest money into things where you can recoup your losses over time. Delayed gratification over hoarding all your earning for yourself. When you’re holding onto every penny, you miss all the ways you can invest in calculated risks that will pay off in the long run.
Measuring your KPIs
A lot of times I hear entrepreneurs say their goal is to make a million dollars a month, and that’s a perfectly valid goal. But unless you have a solid plan in place you’re going to find yourself struggling to meet that goal.
The best way our business was able to start reaching our goals was to start measuring our Key Performance Indicators (KPIs). Having KPIs are essential when you’re trying to scale your business beyond just yourself and a few other individuals. You have to measure each step it takes you to achieve the small goals that lead you to your big goals.
One of the critical things we break down is measuring how many sales will lead us to our recurring revenue goals.
Let’s do some math.
Let’s say, you’ve mapped out your sales funnel, and we’re going to have your sales team make 100 calls, and of 100 calls you were able to set, 25 demos, so 25% success rate. And let’s say out of those 25 demos, you get a third (or 8) to become customers. Say your average customer is worth $5,000. So you would be on track to generate $40,000 of revenue/month. If your goal is $100,000 of recurring revenue next year.
But if your goal was to have $1,000,000, then you’re not on track if you’re only getting $40,000 in revenue every month. You’d need to have roughly $84,000 a month in recurring revenue in order to reach $1,000,000.
Your KPIs help you see all the steps standing in the way of your larger goals. You need to do the math to change your expectations and requirements to hit your goal if it’s not feasible. To hit the goal of $1,000,000 you either need to dramatically increase your closing ratio, or the ability to set demos, or you need to make more calls!
In this case, you need to start making more calls to get to $1,000,000 in new revenue.
That’s the formula you would use to calculate how long it’s going to take for you to reach your goal. Either change your input to reach your goal or change your expectations and don’t set yourself up for disappointment because you didn’t take the time to understand your business.
Now, this is where having data in place can make a huge difference. If you want to make more deals with fewer calls, you can focus on what your callers are saying, or change up your marketing messaging to help convince a prospect to buy without needing so many calls.
Measuring out your KPIs not only helps you set realistic goals for your sales but also supporting your customers. You know as you scale up with sales, you must scale up with your internal processes. Measure to make things more efficient, measure how much new stuff you’ll need, etc.
If your goal as an entrepreneur is to either keep growing, or you want to have a set recurring income every year, measuring your KPIs can help you reach that goal.
Find your own success story
There’s a lie that you’re only a successful entrepreneur if you’re someone like Steve Jobs, Walt Disney, Oprah Winfrey, or Bill Gates. The truth is being an entrepreneur means anyone who owns/operates their own business. Wealth isn’t a measurement of success.
Now sure, money is excellent, and you do need to have incoming cash if you want your business to continue to grow. But don’t feel like you’re not a successful entrepreneur if you’re net worth isn’t millions of dollars.
It’s a terrible mistake to try and live out someone else’s vision of what an entrepreneur is instead of pursuing what makes you fulfilled.
For me, success is measured by are you getting what you want out of your business. If you’re an entrepreneur because you want to make enough money to support your family and be flexible with your children, that’s valid. Don’t let anyone shame you for not pursuing a billion dollar company.
I think the best thing that any entrepreneur can be is to be happy with their life, whether they are running a Fortune 5000 company or not. The worst thing you can do in life is look back and wish you had taken a different path.
I hope you enjoyed my blog about being an accidental entrepreneur, and also realizing you can be successful in your own right, regardless of what society tells you.