Man, do I have a passion. Well, maybe I’m starting a little too far along in the story here – let’s roll back the clock a little bit so you can see where I’m coming from.
I was watching TV the other day and I caught the end of a show about some investors looking to finance the next big product or company. The premise involves amateur inventors and entrepreneurs who try to achieve the American Dream by getting one of these super-rich investors to agree to go in on their ideas – usually with a sizable investment that would allow the entrepreneur to scale their operation in a big way or just launch their product.
During this particular episode, one of the investors was intrigued by the entrepreneurs’ idea, which would do something great for some poor people in Africa while providing a quality product to American consumers at a reasonable price. But this investor, however moved he may have been, responded with something that rang so true I wish I could repeat it to every single investor I meet without coming off as rude or preachy.
What did he say? It was something in the vein of, “this is great and it warms my heart, but HOW WILL IT MAKE ME MONEY?”
Now, before you whip out your list of expletives and email them to me (and compare me to a heartless money monger), let me explain why I think this is a crucial question to ask yourself if you are a serious entrepreneur.
I know most of us have a many things we’re passionate about. Some of these things run so deep in our veins that we feel compelled to make a business out of it. Generally, there’s nothing wrong with that. If you like to get creative with people’s hair or makeup, you may want to open a beauty salon or start a cosmetology business. When I was a kid I met a guy so passionate about baseball cards and comic books that he opened a local “Cards and Comics” store (this is where I met him). I loved going there because this guy knew his stuff. He knew everything that was going on in the various series of comics, and he knew which baseball cards would be the next best ones to save in a hard plastic display case.
I remember wanting to buy some cards off of him, and he wanted more than the cards were worth, because he said Darryl Strawberry and a few others were going to be HUGE.
Here’s the problem with this guy’s business, though: he was too passionate about the business and not passionate enough about making money. There was no question that this guy knew his stuff – he knew the product inside and out – but he didn’t know his business inside and out. The sad reality is that the best he could ever hope for, like the cosmetician or hairstylist, is to make a living, rather than make serious money. And again, if that’s what makes you happiest, then that’s almost all you’ll ever need. Maybe the people on that show I mentioned could start a nonprofit to help these African ladies and they could feel fulfilled for the rest of their lives. But… to make it big, this “Cards and Comics” guy, named Rob, needed to focus more on growing his business.
I found out much later in life that eventually Rob closed shop in the early 2000’s, which serves as proof of his biggest mistake. The key here is that, even a small business needs a plan for at least some growth. Even if to offset any unforseeables like a lawsuit, government regulation, or whatever. But his passion for baseball cards and comic books made him blind to shortcomings in his business. I’m willing to bet that, on a bad month, he convinced himself that the next big “crossover event” in a popular comic book would dig him out of a hole. Or perhaps the next Mickey Mantle would have a special limited edition card that would bring him a big payoff and keep him in the black.
His passion for the sport and the comics, however, blinded him to the possibility of Darryl Strawberry having substance abuse issues, or to Jose Canseco writing a bestselling book naming several top players as anabolic steroid users – which, of course, made many of these players lose all credibility as great athletes. So, cards that could have been worth thousands today, are worth $150 or less. Now, that may sound like a pretty good return on a card that only cost a few cents, but we can’t ignore the time value of money, nor the harsh reality of inflation.
The big takeaway here is that if you have a passion that drives you to open a business, you first need to have an honest soul-searching introspection to determine if your business idea is one that can truly make you a millionaire or if your passion for the product or service would overtake your passion for making money. If it’s the latter, you may be dooming yourself to becoming part of that infamous “80% of businesses fail” statistic – and nobody wants that.