Is your business scalable?

sharon-mccutcheon-556371-unsplash

So you have decided to start a business. Question #1 & 2 should be, how much do you value your time and effort and what ROI do you expect to make?

My primary reason for doing business has always been to indulge my passion, I am good at something and now I’m going to get paid for what I love to do.

“find what you love to do and you’ll never work a day in your life”

(This hung above my desk for many years, how naive..)

Its true that this passion will get you through some difficult times in your entrepreneurial career but eventually the thing you loved may become yet another chore. Choosing to do something and having to do something are two completely different things.

“Chase your passion and the money will follow”

I believed this saying whole heartedly for the longest time, I can tell you now.. It’s a crock of shit! A more accurate saying would be

“Conduct market research on your passion and spend thousands of dollars learning entrepreneurship,.. and the money will follow”.

I find that making a profuse amount of money helps when having to deal with the ups and downs of being an entrepreneur, but for many of us, the only thing that will ever “follow”, is the debt collector.

You followed your passion and the money never came…strange.. Did you ever stop to consider the fact that no matter how hard you worked, no matter how many late nights at the office, your work was never going to pay off, your business is just not scalable!

Until now Scale has always been an afterthought for me, I’ve always daydreamed about how much money I can make with my businesses, but I have never taken a hard, honest look at what money I can realistically make, I was completely blinded by my passion.

Once I’ve finished writing this book, I will use it as a proof of concept for my final try at entrepreneurism. Its time for me to wake up from my ‘daydreams’ of making money and actually start making it!

Before I take that plunge for the 58th time, I want to take a look at 2 of the businesses I’ve had to see what the potential ROI would be have been on my time and effort as well as the potential variables that affect my bottom line. If you’re going to start a business I would invite you to do the same kind of exercise, be honest and do some research about how much you expect to make within your chosen field vs the amount of effort and time you’ll have to put in. (Return on investment of time and effort)

Renovation Company

Time: 10-16 hours per day

Effort: 10/10

ROI:     50K for the first five years 70K+ after that

 When I moved to Canada renovation was one of the only jobs I had enough skills to do (and that’s only because I had two arms and two legs). Many of us ‘fall’ into this industry as much of it is just lifting and shifting (Break a wall and clean up construction debris etc). As I became more skilled in this industry I realized I had a passion for it, eventually I was kinda persuaded / motivated to start my thing. As we all know, Renovation is a very physical job, but when you run your own show, its mentally exhausting too. As the owner you need to be in constant communication with Staff, Clients (past, present and future) and subcontractors, dealing with any problems that may arrive (and there were many),. On top of that you also need to put in a 8-10 hour shift onsite, finishing the day off with paperwork and maybe a quotation visit.

The Problem: Every new project you start is completely different to the last project. In renovation we build a new space within an old structure and each structure was built at a different time with different technics. It took me 12 years to learn how to solve most problems each building would throw at me and it would take me 12 more to teach someone else. How could I possibly step back and manage 2 projects at once, when it takes so long to train myself and others. Each project is unique and because of that there is no ‘standard training’ that I could provide. If I am not present 24/7 I will be asking my employees to think and make decisions that will (and did) cost me time and money. This is a business you work in, not on. If you are looking to run a small business that will make you (after 10-20 years) a comfortable living this is for you, but as it turns out, its not for me. I can maximize this business all I want by seeking out cheaper suppliers and buying in bulk, but when It comes down to it I, am completely reliant on staff members and the decisions they have to make. If I could somehow speed up and standardize training I may have continued with it, but as it is, the ROI for my time and effort simply is not there.

Type: Non Scalable

Café

Time: 8-12 Hours Per Day

Effort 7/10

ROI:   50-80K For the first location 100K+ for the second.

There are many things I like about this model but primarily it’s the fact that training can be quick yet thorough. Once I have shown my staff how to make a good coffee the pressure is now on me as an owner to make the café a success, not my employees. There are no decisions for my team to make. Turn the espresso machine on and the muscle memory my training has created as well as my Standard Operating Procedures will do the rest. As with renovation, this is a business that I will have to ‘work in’ for at minimum the first 1-5 years. In that time I will need to perfect my product by recruiting knowledgeable talent to train myself and my team.

This business does have a lot key elements that fall outside my staff though, which are pivotal to its success or failure, chief among them is location and competition.

In the second year, once I have secured myself a salary its time to look at promoting one of my ‘soldiers’ to a managerial role. The training for this ‘acting sergeant’ should be as thorough as possible and Managerial Standard Operating Procedures (MSOP’s) should be created for them to follow. Sail through years 3 and 4 creating and developing my brand while simultaneously monitoring / reducing costs to maximize profits at all times. In year 5 its time to open a new location.

For those of you that know me, I have owned a coffee shop in the past, this did fail, but not due to scalability, It failed for ‘Partner’ reasons that I cant legally go in to right now, but don’t worry, I’ll dish the dirt on those assholes as soon as I can.. I will do a blog post on choosing the right partners soon.

Type: Scalable

 I think keys to scalability are;

Demand for your product

Quality assessment and assurance

Training staff who provide your product

Teamwork and Team spirit

Employee ‘buy in’ of the Vision

Management of your team.

I’m still debating what to choose for my next entrepreneurial adventure (I have plenty of ‘BIG’ ideas), and a few offers from potential partners and investors, but I can tell you now that my final decision will not be based on passion alone. If I am to give the 150% effort required.. I want to be sure that the sky is actually my limit…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s