A couple of years ago, I started my own business https://insightsintosuccess.buzzsprout.com/1467337/9486643-a-startup-in-the-middle-of-covid-with-karl-hughes. I had been the first employee at a couple of startups, so I knew a lot about the tactical challenges of getting started, but like many business owners, I thought of my business as a job, not an asset.
When there was a problem, I jumped in to figure out how I could solve it. When a customer had a question, I was more than happy to answer without involving my team. When we had to pick a new vendor, I was the one evaluating the options and prices.
I looked at my job as working on anything that would increase revenue and profit, while my team was mostly support staff. They took care of specific tasks that I didn’t want to do, but I was the one who made all the important decisions.
As I’ve met more founders working on businesses an order of magnitude larger than mine, I’ve realized that they don’t look at their companies that way anymore https://karllhughes.curated.co/issues/25. They look at things like an investor would by thinking of their business (or often, multiple businesses) as a series of financial reports over which they have an outsized impact.
“Managing your company as an investment means doing things that boost its odds of growth while steering clear of risks that could shut it down.” – Peter Cohan, Inc. Magazine https://www.inc.com/peter-cohan/why-you-should-treat-your-business-as-an-investment-and-5-steps-to-make-it-pay-off.html
Many of these successful entrepreneurs run their companies from spreadsheets, and instead of thinking of how *they* can solve problems, they think of how they can hire *other people* to solve problems most efficiently.
## As team size increases, your direct impact decreases
As my team has grown, I’ve realized why the CEOs of larger companies act this way. It’s not that they’re afraid to roll up their sleeves or do the work, it’s that their immediate impact decreases as their team size increases.
Sure, I could review every article we create at Draft.dev https://draft.dev, but I’d have time for literally nothing else. I’d never be able to hire people, set strategic goals, or give feedback to anyone else. The longer I hold onto low-level tasks, the less likely our company would be to grow.
The best CEOs are cheerleaders and coaches https://www.forbes.com/sites/forbestechcouncil/2020/03/27/from-entrepreneur-to-business-cheerleader-in-chief/?sh=265092b77628, who encourage and empower their teams while staying out of the way. The leaders who insist on being the final signoff on everything stymie their companies and demonstrate a lack of trust in the people they’ve hired.
## Defining investment and business success
If you put $100,000 into a new investment, you’d expect to make some return over time. In the public markets, that might be 5%-10% per year, while in riskier ventures, you might want to make 15%-20%.
But most entrepreneurs don’t look at their businesses as an investment, so they never do the math on their company.
If you are a business owner who’s able to make $100,000 per year and you sacrifice your paycheck to start a small business which only pays you $50,000 per year, you’re taking a huge loss in opportunity cost. You might like working for yourself, but unless you start to recoup your financial losses in 3-5 years, you’re not running a successful business.
Good businesses operate at a profit, even after paying the owner https://www.karllhughes.com/posts/entrepreneur-salary. While margins vary by industry https://www.brex.com/blog/what-is-a-good-profit-margin/, if you aren’t netting 5%-15%, something is fundamentally flawed in your business. It’s not an investment; it’s just a risky money pit.
I write this not to suggest that I have all the answers, but rather to pass along some of the knowledge even more successful entrepreneurs have shared with me. You can’t transform your thinking overnight, but if you want to run a business at the next level, you have to start acting like an owner at the next level.
I’d love to hear what you think. Find me on Twitter https://twitter.com/karllhughes to pick up the conversation.
To find out more about Karl’s business, go to: https://draft.dev
Linkedin: https://www.linkedin.com/in/karllhughes/