So corporate life isn’t cutting it and you decide to become an entrepreneur. You translate your idea into a business plan, raise a little capital and start executing your plan. You quickly learn that growth takes longer than anticipated and costs are more than budgeted. So to keep your net profits as high as possible, you take on more and more responsibility for the day-to-day execution of the plan.
But soon funny things start to happen. Your persistence starts to pay off. The phone rings more regularly. Referrals start coming in, sometimes from sources you don’t even recognize! And now you have a new problem. Your decision to keep costs low by taking on the majority of the workload is starting to hamper growth and stall productivity. It’s now time to enter the second phase of your business plan and learn how to work on your business instead of working at your business.
This is a scary and exciting evolution for every successful business owner. Whether the solution involves adding people or new technology, it usually means taking on additional costs and risk. So as you and your business continues to grow, keep these four things in mind as you start navigating this second phase:
- Understand the Value of Your Time: During the first phase of your business plan, time is more abundant than money. This allows you to take on a broad range of responsibilities since you’re considered a “free” expense. But there are only so many hours in the day and each new client increases the workload exponentially. What is your time worth now? Where can you have the greatest impact and most importantly, the greatest return on your investment? Placing a value on your time may make decisions like hiring a part-time or freelance assistant much easier. Perhaps you will find that your time is worth $100 an hour but some of the duties you’re preforming could be sub-contracted for $15 a hour.
- Find Scalability in your Earnings: While there are only so many hours in the day, adding more people or better technology to your systems can exponentially increase the amount of “work” your company can do. But this scalability in production comes with an increase in costs. The art of navigating this next phase is understanding where profits are increasing more proportionately than costs. In the example above, assume one hour of your time generates $100 in earnings. That means your time is worth $100 and a 1:1 ratio of time to earnings is established. But perhaps the same work can be completed with 15 minutes of your time and two hours of an assistant’s time at $15 per hour. You still earned $100, but now your “cost” is down to $55. More importantly, you made $45 with only 15 minutes of your time, which equates to $180 in earnings potential per hour. That’s an increase in your ratio to 1:1.9 and represents a 90% increase in your earnings. That should positively impact your profitability.
- Maintain Your Brand: The success you’ve enjoyed to date has built more than your reputation and credibility, it’s built your brand. Think of your brand as how consumer/clients perceive the soul of your company. Nothing in your business should be treated more preciously than your brand. So as you scale and grow, don’t lose sight of what made your business successful in the first place. Not all decisions should be strictly financial ones. If doing something makes you a few extra bucks but starts to alter how consumers perceive you and your brand, it may not be worth it. Also, if you start bringing in new people, teach them more than your systems and processes. Make sure they understand and convey your brand properly.
- Don’t Forget Why You Started: For me, the primary reason I became an entrepreneur was not to make more money…although that was a strong secondary reason! The reason I started my business was to have a more flexible schedule that allowed me to spend more time with my family, especially coaching my two sons in their various after-school sports. Don’t forget WHY you started your business. As your company grows, the demands on your time will unavoidably increase as well. Don’t make decisions that sacrifice your original goals and wind up feeling trapped in your success.
About The Guest Author: David Coe is the founder of Freedom Growth, a real estate investment company specializing in investments through self-directed IRAs. Although located in Southern California, David Coe & Freedom Growth handles real estate investments throughout the country. Connect with David Coe on Facebook.