Two Reasons Entrepreneurs are Setting the Wrong Goals
The turn of the New Year naturally causes us to think about goals, and as you’re developing a business idea or business plan, you’re probably going to set a few different types of goals.
+ Financial: to calculate how much money you need/want to make.
+ Growth: to comparatively build the company.
+ Operational: to make sure you’re reaching profit, efficiency, and culture.
However, as I’ve watched young entrepreneurs set goals, including myself, I’ve noticed how easy it is to do this incorrectly. So many people will set the wrong goals, and I’d like to highlight two main reasons as to why. Here is some advice for young entrepreneurs as to why they are setting the wrong goals.
Lack of Definition
It’s impossible to set or judge a goal around something you haven’t defined. You need to dive into what your definition of success means because goal setting will come from that.
We can compare two very different starting entrepreneurs in order to better understand this. Let’s take a look at a young entrepreneur who has had a dream of being a wedding planner ever since she was 5. She’s seen every episode of David Tutera and Rich Bride Poor Bride and can’t wait to actually do it for herself someday. After a lot of research, the girl realized there aren’t many firms that are hiring wedding planners, so, starting her own business seemed like the best way to achieve her dream. Before filing for an LLC, she ran her financials and realized that with approximately $800k in gross revenue per year she would be able to pay her bills and live to the standard of living that she desires.
So, what does “success” look like for this entrepreneur who is starting out? Booking and completing enough jobs so that she can continue to do what she loves, which is planning weddings, while also being able to live comfortably.
Let’s look at one more example of an entrepreneur who is passionate about Haiti. This young entrepreneur visited Haiti with their church multiple times and continues to keep in contact with three families in the area. Every time he talks with his Haitian friends, they ask for prayers for jobs. The boy finally had enough and decided maybe God could use him to help answer their prayers, so he started a small clothing line that sold sweatsuits. Each of the three families could live fairly well on $200/month. Therefore, the boy realized he needed to generate a minimum of $600/month of profit.
What does "success" look like in this scenario? Enough profit to support three families.
When we got to the root of each of these scenarios, running a successful business didn’t necessarily look like becoming a millionaire. Would it be cool for the boy to scale the textile business to hire more people in the Haitian village? Yes. But is it a failure to only create $1800/month in profit? No! The boy wanted to improve the lives of his friends and make an impact on the community, and any development, no matter how marginal. We can take this a step further by asking “would God consider the boy a failure for creating a small business?” After you answer that question in the context of this example, go ahead and apply that to your own life and goals.
And in terms of the girl who wanted to be a wedding designer, money didn’t matter to her beyond the ability to support herself. At the end of the day, her dream is to plan weddings, and if she’s able to do that, it doesn’t matter if she does $5 million in revenue or $500 thousand.
But this is easier said than done. There are so many people with a hunger to “succeed”, to “make it”, or to be a millionaire by 25. Many entrepreneurs will look at other companies that they consider to be “successful” and apply their own metrics incorrectly to their own without considering the industry and personal goals in the first place. We are obsessed with the size of out startup because those numbers are flashy, but there’s much more to a successful business other than growth. You get to decide if your business is successful and no one else.
On the flip side, maybe you do have a strong desire to scale a startup or grow something big. Maybe you enjoy the challenge of cracking the puzzle of what it takes to scale a company. Or, you’ve created a product that you believe would have a strong impact on a large scale. While that is the case for many entrepreneurs, I believe that most true entrepreneurs can achieve their true goals without becoming a millionaire.
The key here is to make sure you remind yourself of why you’re interested in business in the first place because if you’re not clear on your vision and goals are, then it's easy to fall into the trap of disappointment because you’re not a millionaire yet.
The next issue often made in goal setting by young entrepreneurs is unfairly comparing their own startup. For example, if you are comparing two different companies, and one has an annual revenue of 56 million and the second has an annual revenue of 2 million, you might stop there and assume that the first company is more successful than the second. If your definition of success is only in terms of revenue, then you would be correct.
However, what if the first company was an app with a highly viral and scalable business model, and the second was an engineering consulting firm? In this case, you’re comparing apples to oranges because the parameters are different for each industry, and scaling/growth works differently.
To scale a consulting firm, your growth is determined by the number of consultants in the firm. You can only hire so many people in the community that are the “right” fit and manage them in a cohesive way. Each new employee requires quite a bit of attention and support to maintain the company culture and a reputation of excellence. At the same time, there’s a cap to the amount of output each of those employees can do (about 40 hours a week). As revenue grows, the amount of energy and labor required by the company also grows.
It's a completely different business plan than scaling an app. Once the product is built, it doesn’t matter if 10 people use it or 10 million people use it, because they are all using the same product and most customer support can be automated. Therefore, as revenue grows, the amount of energy and labor required by the company might grow a bit, but only fractionally.
Do you see a really important difference here? Scalability and growth are going to look different across all industries. I see people judging their own businesses as less than someone else just because their revenue is not as high, but that’s not even relevant if you’re comparing an exterior painting franchise to a clothing line because the rules and parameters are different, and they should be. Now let me ask, have you ever fallen into this trap? I know I have, and it will only irrationally rob you of your joy.
Questions to ask yourself:
Here are a few questions to ask yourself in order to consider what your goals are and how to think about them.
+ Why did I become an entrepreneur in the first place?
+ If I never become a millionaire, would I still be satisfied? Or would I feel like my time is wasted?
+ What would God consider to be a success?
+ What are your personal financial needs and wants?
+ What industry are you in and how?
+ How do I want to grow through this experience?
+ You might be putting pressure on yourself to be a millionaire in order to have a successful business, but maybe you don’t need to. I encourage you to dive into these difficult questions and reflect on your industry and your goals are.
Want to grow your dream with other young entrepreneurs while traveling abroad? Sign up here to learn more about how Global U can help you bring your dream to reality!