I was recently talking with a CEO client and he told me how hard he was working: putting in 80-hour work weeks and traveling all the time in an effort to grow his business. Plus, he was investing a lot of money in his business as well. He was clearly struggling.
So I posed a posed a question to him: how big is big? My point was for this CEO to stop and evaluate whether all that work and time he was putting into his business was worth it. Was his end goal big enough to be worth the effort? It's actually a question every entrepreneur should be asking themselves as well.
Most entrepreneurs have big dreams and visions when it comes to their businesses. But unless you're willing to take a really hard and honest look at the true potential for your business, you might be wasting some of the precious years of your life if the dream you're chasing is really just a mirage. The risk is that we convince ourselves we are chasing a giant market, when we really aren't.
In this case, the CEO ran a very specialized software company that sold into a niche market. He offered his suite of products on a software as a service (SaaS) basis, all online, which he charged $1,000 a year per user. He estimated that the worldwide user base for the company was about 15,000. That meant that if he cornered 100% of the global market, he would have a $15 million a year business--which is nothing to sneeze at. Plus, given the strong valuations that SaaS companies earn, he could sell his business to a strategic or financial buyer for a big multiple.
The problem was that this CEO only currently sold to a European customer base--which accounted for only about one-third of the market, or about 5,000 users. Even then, he only had the potential to take about 60% of that market, or about 3,000 users (and he already had 1,500). That meant that he was killing himself--spending time away from his family, working every minute, and investing his valuable capital--for a potential $3 million business.
As we dug further, we also realized that there were no real opportunities to offer more products to his customer base, which is the normal move in a niche market. He was stuck. Unless he made extensive investments in expanding more into the global market--something that would take years and lots of capital--his runway for a business looked awfully small. He realized he was playing a losing game. Even if he reached his target, it was still pretty small.
So what did he do? He sold the business and took the loss. He decided it just wasn't worth it.
While this might seem like a shocking decision coming from an entrepreneur-;people who are typically optimistic and enthusiastic-;it was the right decision for this CEO. He realized that putting all that time, effort, and money wasn't going to generate the kind of return to make it worth it. In the case of his business, big wasn't big enough. He was playing small ball.
Now, if you're building a comfortable and profitable lifestyle business where you get to stay home with your family, this question probably doesn't apply to you. You've found what you need to be happy. But if you're driven to do something really big-;to put a dent in the universe, as Steve Jobs put it-;ask yourself before you begin making the sacrifices needed to get there.
So when it comes to the time, money, and effort you're putting into your business, take a minute to ask yourself: how big is big? If the brutal truth is that what you're building isn't big enough to be interesting, then it might be time to make some radical changes before it's too late. You only have a limited time on this planet; make sure what you spend it on is worth it.