The Profit Window

Growth.

Most business owners are obsessed with it.  

Early stage entrepreneurs focus on top line revenue.  As they gain experience some of them shift priority to profit.  As they gain more experience, some veterans shift back to revenue (or back and forth.)

Many entrepreneurs focus on vanity metrics like headcount.

For the past five years, I’ve managed a small team and been stuck under the $300,000 revenue ceiling.  The entire time I’ve worked diligently to grow the company and have continually invested in sales and marketing.

Superficially, it doesn’t seem like much has changed.  We certainly haven’t grown from the perspective of revenue or number of employees.

But we’re actually much more profitable than we were five years ago. 

We’re more productive at creating value.

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Profit Isn’t the Bottom Line

Profit isn’t the difference between revenue and costs.  It’s not a line item on an income statement that is black or red.

Profit is the capture of excess productivity in value creation.

There’s a functional difference between the ideas.

The first is a measurement which can be gamed.  The second speaks to the underlying forces that drive a business.  

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Folding Nothing

Folding nothing is a core entrepreneurial skill that concerns transforming value starting with nothing.  

It’s how you get from $0 to $1 to $10 to $100 to $1,000 to $10,000, and so on.

It’s a bit esoteric to think about in abstract, so I’ll explain how it works through a story.

Zero

Two years ago I forked a company named, “Resurgent,” off from our original Blue Bridge dev shop.

Resurgent is a consultancy that helps member based associations transform their website into a tool to grow membership.

Because I was approaching it as a consulting model, based on trust and expertise, I knew that speaking would be key.

I started Toastmasters and began to develop my speaking skills.  That was easy enough- just a matter of commitment.

The larger obstacle was how to get speaking gigs.  

Conference organizers are evaluated based on the quality of their speakers.  They need to put solid people on the stage who entertain and educate.

Consider your current situation.  You probably don’t speak at conferences.  You probably know very little about member based associations.  You’re actually very close to the spot I was when I was facing this obstacle because we had only one previous association client.

If you were me, starting at zero, how would you convince someone to let you on a stage? 

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The Thousand Day Rule is Dangerous

Update 10/3/2020: You can hear Dan and a guest discuss the risks presented here on this podcast.

My all time favorite podcast is the Tropical MBA.  I’ve been listening to it for most of my entrepreneurial journey.  It’s an entertaining and insightful look into the modern small business.

The podcast hosts Dan & Ian have developed lots of useful frameworks to think about decisions in business.  They’ve coined concepts like “Rip, Pivot, & Jam” about innovating within proven value chains and “if it makes you money you shouldn’t be doing it,” a rule of thumb for where an entrepreneur should spend their time (and money.)

I’m a huge fanboy.

But I take issue with one of their key theses, “The Thousand Day Rule.”

The Thousand Day Rule is a pattern that they noticed where entrepreneurs needed about a thousand days, or 3 years, to build a business that surpassed their job income.

At best, the Thousand Day Rule is incomplete.  At worst, it’s destructive to new entrepreneurs.

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Most Things Don’t Work

Photo:  Winged Victory

I was doing product research on a Shopify plugin we’re developing and I came across this post in the Shopify forums from someone trying to sell clothing:

I invested 2000 and nothing

I’ve had my store redesigned twice. I’ve took courses, marketing courses, ripped off by *mentors* and 600 on SEO. I don’t know what to do I’m so anxious.

On the one hand, I’m sympathetic- it sucks to invest, to work, and to see nothing in return.  On the other hand though, that’s sort of how it works.

Yes, there are people who stumble into customers.  The dice in the roulette wheel lands on their number and they have a huge head start on everyone else.

And we see those stories.  Entrepreneurs brag about their success or others promote these stories to sell their own products and services- see this method works, here’s an example.

But that’s not the way it works for most folks.

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What It’s Like to Donate a Kidney

A few days ago, I donated a kidney to my dad.  Because it might be helpful to other donors, I’m writing down what my experience was like here- all the way from learning about my dad’s disease to walking out of the hospital with one kidney.  I’ve included notes on the prep work, what the pain has been like, and what sort of medications I’ve been taking.

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The Finer Things

A couple days ago was New Years Eve.  As a small celebration for the end of a good year, I took my single employee, his wife, and my wife, to a fancy dinner.  We ate caviar, Wagyu beef, sea urchin, crab, smoked sturgeon, black garlic, truffled potatoes, and more in a series of small dishes over three hours.   Each course was paired with a wine from around the world. I was so full and buzzed I was almost sick. It was great company, a wonderful experience, and a fitting end to the year.  The total bill was $900.

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Making Progress When You’re Stuck

Have you ever read a Sherlock Holmes mystery?  It starts with a case presented to Sherlock and Dr. Watson with quirky circumstances and odd details.  As you read things become even less clear with increasingly bizarre events and nonsensical information.  At the end though, the great detective explains all with brilliant deductive reasoning that puts each element into its place in a logical series of events.

New endeavors have a lot in common with Sherlock’s cases.

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Beginnings as Leverage Points

Study the hard while it’s easy.
Do big things while they’re small.
The hardest jobs in the world start out easy,
the great affairs of the world start small.
So the wise soul,
by never dealing with great things,
gets great things done.

– Tao Te Ching, Ursala Le Guin Translation

I took a personality profile called Strengths Finder six years ago and I’ve found the results of it to be accurate and useful. One of the recommendations that stuck in my mind was for “Strategic”, one of my signature themes.

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Goal Setting With Winnable Games

List of failed goals.

A round month of failures, part of a quarter of failures.

I think about big questions for years at a time.  One of the questions that I’ve chewed on since my twenties is about goals.   What’s a better kind of goal: a process goal or a results oriented goal?

Process goals you can control. You set a target focused on the process of achieving a goal. You say, “My goal is to go the gym 20 times this month.” These kinds of goals are focused on the journey, not on the results.

But focusing on the journey is a huge problem, because you should care about the results. The reason you set a goal is to achieve a result. Another problem with process goals is that by focusing on controllable actions you inherently limit your capacity to grow. You don’t need to reach beyond who you are today to achieve a process goal. Going to the gym 20 times is simply a replication of your current thinking with a certain consistency. To achieve your underlying goal of being thinner, you may need to change your workout, change your diet, your eating schedule, or your environment. Continue reading

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