Keeping score in business is a big deal for me. And it’s not simply because I’m a competitive person…
As an entrepreneur, it can be hard to tell if what you are doing is what you should be doing – or, in other words, if it is the best use of your time.
Sometimes entrepreneurs garner good results, but had they spent their efforts elsewhere they could have been great. That’s why how entrepreneurs keep score is so critical. We only have ourselves to keep us honest.
In light of that, there are really only two ways to keep score as an entrepreneur – one is ideal, the other can often be misleading.
Does how much money you make provide a good scorecard for entrepreneurial success?
Not really. Money is a result of work, certainly, but it can be misleading. Oftentimes, you can make a lot of cash with a short-term view…
The short game, particularly in finance, contract work, and as a restaurateur for examples, often gives the results desired in respect to dollars earned, but…
You can take on a lot in a very short time, make a ton of money, and in the process burn in your own fat so to speak. Moral choices aside on how that money is made quickly (compromising quality for quantity), taking on too much too fast can result in an empty pipeline of deal flow or customer traffic later.
Using money as a measurement of success may appear to be accurate during a short lapse, however it can be a hindrance down the road because it may take your eye off the important business building tasks for long-term growth…
Constantly looking to cash in creates the cycle of churn and burn, or fill-up and empty then rebuild every six months. Entrepreneurs playing the short game can be viciously exposed during down business cycles. Think about some public corporations’ initiative since the financial recession of borrowing money to buyback their own stock or pay dividends. This is precisely the short game activity I’m referring to. Short-term payout for shareholders (via a rising stock price or dividend) will most certainly come at a cost to innovation. Spending money to keep shareholders happy for the time being is not money well spent for a tech company.
Let me give you another real-world example: I have a friend who is a realtor – very successful. However, during the boom time, he decided to go all in on high-end new homes. They were selling like hot cakes, so he committed to only sell million-dollar plus brand new homes in this boom; and he partnered up with a builder while leaving his established, steady business of selling pre-existing homes.
Things were good for new home sales, and he had a record year financially in 2013 after 20 years in the business. He won awards for dollar volume of sales, and his prospects were looking better than ever. Problem was, he was relying on foot traffic coming into the show homes for business. Granted, if a prospective buyer came into his show home he could close better than anyone. The guy can sell. However, when the boom ended in late-2014, those high-end homes weren’t selling. He spent the previous two years selling based on foot traffic, abandoning his bread and butter business: selling pre-existing homes, building relationships and marketing to families. This was, after all, how he got to where he was prior to the boom. This model gave him a clear barometer of how he was doing, from a success standpoint, because the amount of referrals generated demonstrated if his customers were happy with his service – the best success barometer of all…
That’s a stark contrast to judging success based on money earned. When the boom went bust, homes in the 500k range continued to sell at a strong clip. People could still afford those homes. The new, multimillion-dollar home market, however, was dead. And my friend, who had spent two decades selling at the middle-income price point was no longer relevant in that market. He literally spent the next 18 months building his name back up in that price range by meeting with families, spending money on advertising, a lot of coffee shop meetings, and upgrading his accreditations. After a lean year in 2015, he’s catching his stride once again. Short game versus long.
The best barometer of success for entrepreneurs is easy to measure. Did you make or take today? In other words, did your customers give you money, or did they compensate you for your ability to create value. Did you write a blog worth reading or build an office tower? Make don’t take. At the end of every day, ask yourself what you made today… that’s the best measurement of entrepreneurial success.
Stay hungry,
Aaron
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