Be Rich or Be Happy: Which Would You Choose?
BY Jeff Haden
Sorry, entrepreneurs: You're not likely to achieve both. Here's why.
The stereotype of an entrepreneur is a person who starts a business—any business—in order to get rich. In reality that is seldom the case: Most entrepreneurs start their small business to follow a passion, do what they love, and live a dream.
But what if you want to do what you love and get rich? Without the right approach, it's often impossible to accomplish both goals.
The problem lies in scale.
Say you've always dreamed of being a chef, so you open a 25-table restaurant. You get to do what you love, but in simple terms the prices you can charge and the number of meals you can serve naturally caps the financial returns possible.
You can be successful—but only to a point.
And you might be perfectly fine with that, as long as you view success as getting paid to do what you love. (Which is, of course, an awesome definition of success.)
The same is true if you're a service provider and especially if you're a one-person shop. Revenues are limited by time and rate: The number of clients you can serve and the level of fees you can charge. In simple terms, capacity and price limits your earnings. Once you hit those inherent caps, the only way to generate more income is to expand: Add more locations, add employees, add to your investment... add more of everything.
And then you get to do less of what you love. More of your time will be spent working on your business, not working in it. I know: Every business expert says to be successful you must work on your business, not in it—but unless what you love is running a business, you won't be as happy.
Say you're a contractor and cabinetmaker, like my grandfather was: He loved working with wood, so generating more revenue meant spending a lot less time in the shop and a lot more time with his employees and customers. (To get his woodworking "fix" he resorted to spending Sundays in his shop, which, as you can guess, went over really well at home.)
Say you love landscaping, you dream of starting a landscaping business, and want to make $300,000 a year. According to salary survey sites the average owner/operator of a landscaping business earns somewhere between $30,000 and $85,000 a year.
Of course that's just an estimate. Certainly some owners make less, and some make a lot more, but absent a unique approach your income will probably fall somewhere within that range. (Achieving out-of-norm results in any field requires taking out-of-norm actions.)
Say you hit the top end of that estimate. $85,000 is a great income, but it's also well short of your $300,000 target. Unless you're in a densely populated area and also land a number of commercial accounts, to reach your income goal you'll need to establish multiple locations in multiple markets.
Either way, you'll get to do a lot less landscape design and implementation than you originally hoped since your primary focus will need to be on growing and running the business—not on designing, installing, and maintaining amazing landscapes.
That leaves you with a choice: Do more of what you love and earn less than you hoped... or scale up and do less of what you love in order to make more money.
Only in rare cases do entrepreneurs get to have it both ways.
So take a step back and think about your goals.
If you will enjoy the satisfaction of doing what you love and will be satisfied with the income you can realistically expect to earn, then scale doesn't matter. Live your dream and work in your business.
But if the income potential of doing what you love won't be sufficient, create a plan that allows you to scale your business. Set your financial target and work on your business to build a company of sufficient scale to achieve that target.
Either choice is great—as long as it's the choice that works best for you.
JEFF HADEN learned much of what he knows about business and technology as he worked his way up in the manufacturing industry. Everything else he picks up from ghostwriting books for some of the smartest leaders he knows in business. @jeff_haden