How to manage your life with just $19 Billion …

After the recent Facebook float, how did Mark Zuckerberg fair and – more to the point – how is he going to live?

According to the online business media:

The founder sold 30.2 million shares out of his entire holding, leaving him with a $US1.1 billion payout. It’s a huge amount of money, even after taxes, but it doesn’t come close to his final stake, somewhere in the region of $US19 billion.

So, the answer to the “how is he going to live?” question is: very well, thankyou!

Instead, let’s take a look at a hypothetical Internet business owner whose company IPO’d for mere millions in value, instead of Zuckerberg’s billions:

Let’s say that our hypothetical founder sold 30.2 million shares out of his entire holding, leaving him with a $US1.1 million payout. It’s a lot of money (let’s pretend that it’s after taxes), but it doesn’t come close to his remaining stake in his company, somewhere in the region of $US19 million.

How is our founder to live?

It would be tempting to say that he has $20 million, so a typical ‘safe withdrawal rate’ of 4% [AJC: which could be achieved through a combination of dividends and selling down small amounts of stock each year] would suggest that he has a massive $800k disposable income each year.

But, spending anywhere near $800k – even spending anything more than 25% of this amount p.a. – would be a huge mistake.

You see, the bulk of his money is in stock … and, risky stock at that: 5% of his net worth in cash and 95% in one relatively small, ‘hi tech’ company …

… and, we know what happens in tech: it can be boom/bust [AJC: remember MySpace, anyone?].

This is no different to an athlete trading off his contract, and spending money like it’s forever … except when it isn’t, which is why 78% of NFL players and 60% of NBA players are bankrupt within two years of leaving the game.

The second – less aggressive – temptation, then, would be to live off the dividends from the stock held …

…. let’s say that the company pays 2% dividends [AJC: which would not be unusual for a tech. company seeking to reinvest in itself, or acquire other companies, even though many - such as Apple - would pay zero dividends], which would deliver $400k per year.

But, again, what happens if the company stops paying dividends?

Instead, what our founder needs to do is realize that he is merely potentially very rich, but right now is a very valuable employee (and, controlling shareholder) of a company that is rewarding him with (a lot of) stock that may – or may not – one day convert to cash.

So, what our founder needs to do is count his blessings … I mean, assets:

1. He probably has a very healthy $400k+ annual salary, he should live off no more than 50% of this (indexed for inflation) and invest the rest.

2. He probably receives $400k in annual dividends; he should add 100% of these to his nest egg.

3. He has a starting nest egg of $1.1 million, which he should invest in ‘passive’ income-producing investments [AJC: real-estate is ideal for this]

As he starts to convert more stock to cash (i.e. through sale of small amounts of stock each year, as the law & his board may allow, and/or dividends) eventually, his nest-egg will grow to $4 million …

… which is his lifestyle break-even point i.e. the Rule of 20 says that your nest-egg should be 20 times your required annual living expense, which is currently $200k.

The good news is that anything converted to cash – hence, into passive investments – over $4,000,000 allows our founder to increase his annual living expense.

You’ll find that if you follow this system:

a) Sure, you’ll be living well below your ‘paper means’, but once you realize that your wealth is merely on paper, you’ll get over it, and

b) You’ll slowly-but-surely be transferring your ‘paper wealth’ into real wealth (i.e. passive investments), and

c) If you choose income-producing real-estate as your vehicle for holding your ‘real wealth’, you’ll pretty quickly find that you are able to support an even more quickly-increasing standard of living, no matter what happens to your tech company, and sooner than you may think.

This is how to bullet-proof your future …

… unless you’re Mark Zuckerberg, who can probably already survive on 4% p.a. of $1.1 billion

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What’s a simple business to start?

Often, I’m asked about businesses to start.

Usually, the person asking has low-to-zero capital to invest; wants to start part-time; and, wants “a simple business to start”:

What is a business that I can start, so simple in nature, that virtually I (perhaps with the help of a friend) could start with less than $3000 and some hard work?

Well, there are lots of what I call ‘traditional’ businesses that you can start part-time, depending on your talents:

For example, if you are good at photography, you could do wedding photos at nights or on weekends. Same if you like baking (“cakes delivered to your door”).

But, these aren’t as easy to scale part-time, in my opinion,  as an online business …

… which is why I prefer online businesses, these days.

Even then, some online businesses are better than others:

For example, starting a blog (perhaps like this one), or selling information products (e.g. eBooks), or even starting an eBay business might be relatively easy, but they’re hard to scale into something that might one day take you full-time (so that you can quit your job and become your own boss) or even – eventually -become saleable.

So, let me share with you the little-known secret of the type of online business that I think is:

1. easiest to start, and

2. makes the most money, and

3. is still quite scaleable and saleable (the two magic words if you want to retire rich).

The secret is to create a 2-sided market place.

A two-sided market place is any kind of business that has buyers on one side and sellers on the other:

1. eBay is one example: it’s people and businesses selling to other people and businesses.

2. Amazon is NOT an example (it’s very hard to set up a warehouse and systems to become an online seller like Amazon) but the Amazon Marketplace is a example: it has buyers and sellers using Amazon’s payment platform to sell stuff to each other.

3. Etsy is another example: people make things (arts, crafts, jewellery, etc.) and list it on Etsy.com where people browse and buy things: Etsy doesn’t make anything, sell anything, or hold stock … it just makes a % of every sale for introducing both sides of the marketplace to each other.

4. The most famous recent example is Airbnb, started by 3 guys who simply came up with the idea of letting people share their couches for backpackers to stay (they weren’t even the first: couchsurfing.com got there first); it has since evolved into a real competitor to the Expedias and Pricelines of this world and is on track to become a $1bill.+ company.

That’s why, when people ask me what business to start, this type of business is usually where I then point them.

But, how to start?!

To start Airbnb (I suggest you don’t, this is just an example):

1. One of the startup’s founding team goes around their home city photographing and signing up a whole bunch of ‘bed and breakfast’-style accommodation (I know that Airbnb didn’t start with this; remember, this is just an example)

2. The other founder gets to kick back with a tiny budget to drive traffic to a ‘sign up to be notified when … ‘ landing page (LaunchRock is ideal for this).

[HINT: try $50 worth of Facebook ads and another $50 of Google Adwords and see if that drives any traffic. Spend $10 on each ad platform on 5 different keywords rather than $50 on one. Remember to target your ads specifically to your city (I know FB allows this; I'm not sure if Google does). Submit your landing page to sites like betali.st and startupli.st. Wait for a more significant story before you spam Techcrunch and Mashable]

3. Once you have 20 to 50 BnB’s signed up, and perhaps 200 – 600 names on the landing page, you put the two sides together and see if magic happens!

4. If so, you rinse and repeat in another city, and another (until you raise sufficient investment to allow you to hire ‘city managers’ to do the photographic/doorknocking for you).

5. If not, this marketplace idea sucks. Try another.

Now, stop asking and go do it …

LATEST NEWS

Catch my latest interview here: http://www.creditcardassist.com/blog/7-million-7-years-best-of-the-best-blogger-series-22702/ - thanks Bill (founder of Credit Card Assist).

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How to start with next to nothing in cash and build up from there?

Ken H asks:

I am just starting my journey to the concept of making money when you buy. Can I get more examples of what can be bought to use this concept? Where do I learn a strategy that I can start with next to nothing in cash and build up?

Great question, Ken!

The short answer is that you need a source of cashflow.

The long answer:

A high-paying job is ideal (but, only if you invest 30% to 50% of it after tax) …

… if not a high-paying job, then a second source of income.

I like the idea of starting an online business ‘on the side’ and reinvesting 100% of the profits (a) back into the business to help it grow and, whatever’s left over, (b) in income-producing investments.

The ideal investments, of course, are ones where you can get a silent partner to put up 75% – 90% of the money required. That way you can get more investments quicker.

Also, when the bank puts in 80% of the funds required to fund a real-estate acquisition, and it goes up in price by 20%, you have just doubled your money (less the bank’s interest).

And, the best ‘silent partner’ that I know is The Bank. But, the investments that The Bank likes the most – hence, they will lend by far the most on these – is good old-fashioned real-estate.

So, I would reinvest as much of my savings as possible into real-estate, and then wait 10 to 20 years (unless my business grows really fast, in which case I might wait 5 to 10 years.

Sure beats ‘working for The Man‘ for 40+ years, doesn’t it?

Installing an ATM in your business …

I met a small business owner a few weeks ago …

He was a smart young guy [AJC: aren't they all?] who was setting up his own Internet design studio, building Internet-based software projects for other business owners.

His business is essentially a professional service business, and my advice to him was pretty much the same as I give to all professional service business owners (consultants, accountants, attorneys, doctors, etc.):

Except in rare circumstances, you don’t have a business, you have a high-paying job … with perks!

[AJC: the perks are around the tax benefits that attribute to business owners but not to paid employees; ask an accountant for examples.]

Most of these kinds of businesses don’t scale very well i.e. they can’t grow very large; they rely on the owners’ personal exertion (sometimes called ‘partners’); and, either can’t be sold, or can only be sold for small multiples of annual profit or turnover.

In short: you can’t rely on selling these businesses to fund your retirement.

But, what they do generally provide is income …

Because they are professional services, the owners are able to sell their own labor – and, those of their employees – at high multiples, usually generating excellent recurring revenue.

And, because they often take years of hard work and relationship building over many, many clients they can be quite “bullet-proof” (if well managed) in terms of providing that income reliably.

This was certainly the case for the young guy that I met.

Even though his agency was still quite young/small, it was already generating a nice income and showing signs of growing well.

My advice for him was to grow his personal income very slowly (this is advice that I would give to any business owner), and to pull as much money out of the business as possible (this is not advice that I would give to other business owners) …

… my advice was to treat the business as his personal ATM

[AJC: but not to the detriment of the business, or his partners, employees, clients, backers, etc.]

But, my advice was not to spend that ATM-cash on personal lifestyle building (homes, cars, vacations, etc.), but on passive investments.

I recommended that he use that cashflow to fund an aggressive investment portfolio, outside of his business: one that would one day grow to replace his personal income as generated by the business.

When the day comes that his passive income surpasses his personal business income, he becomes free.

What would you advise?

How to increase sales …

If you’ve chosen ‘business’ as your primary vehicle to reach your own $7 million in 7years, then it’s best that you focus on increasing the amount of profit that you get to take home each day, week, month, and year.

To non-business readers this may sound like obvious advice, but you would be amazed at how many business owners focus on two numbers:

1. Sales Volume – usually expressed as “my business turned over $2.3 million last year”, and

2. Profit Margin – usually expressed as “my business makes 7% net profit, before tax”.

These may be key numbers for a large business – particularly if listed on a stock exchange, because the market punishes stocks that don’t grow their sales (sales $) fast enough, with comfortable margins (profit %) – however, for a small business …

… these are simply ‘vanity metrics’.

The only number that really counts is:

3. Net Profit After Tax - usually expressed as “Last year I took home from my business $738,000 in my pocket”

This is the number that you get to spend and / or invest (preferably the latter) each year, and the one number that you want to grow year-over-year.

So, when aspiring or new business owners ask me:

What is the best way to increase sales volume for a small business?

I say:

According to Jay Abraham (master marketer), there are only three ways to increase sales volume:

1. More customers (customer acquisition e.g. marketing, advertising, referrals),

2. Higher sales per customer (up-selling and cross-selling e.g. bundled offers),

3. More sales per customer (customer retention e.g. backend products)

You only need small improvements in each to make major improvements in your overall sales volume i.e. a 10% improvement in each area means a 33% increase in sales volume, overall.

An example strategy (for, say, an eCommerce site) that encompasses all three elements might be to:

1. Improve your Google search rankings and run some Adwords and FaceBook ad campaigns to bring in some new customers.

2. Create some bundled packages and add some special checkout offers to entice some of your customers to increase the size of their order.

3. Capture their e-mail addresses and send out special offers once every 6 weeks to encourage some repeat sales.

If you are very successful with your bundled, checkout, and e-mail discount offers, you might find that your % profit margin slips slightly, but that your overall sales volume increases significantly.

More importantly, the amount of net profit – i.e. cash that you get to take home in your pocket – goes up dramatically, meaning that you have a lot more cash available to invest in stocks and real-estate.

Then, it won’t be long before that $7 million in 7 years starts to look pretty achievable.

Thinking about starting a solo business?

I think, these days, if you aren’t starting YOUR FIRST BUSINESS as an online business then you aren’t serious about making money.

Let’s face it, we’ve all tried lemonade stands, paper rounds, flea markets and even working at McDonalds as ways to make money. But, compared to these, an online business can knock it out of the ballpark.

Let’s take my son as an example:

At age 12 he came to me and said he was starting an eBay business; he asked if he could use my eBay account (I said ‘yes’) and if I would invest $50 in return for 50% of the business so that he could buy stock.

Not long after, he had completed his first transaction and returned my $50 so that he could get my 50% back (I didn’t have the heart to tell him that it doesn’t quite work that way).

Within two years he was negotiating daily with Chinese suppliers, bringing wholesale quantities of stuff to the USA and shipping daily from our house (bless the US postal system … it works!). He also kept a fully-fledged accounting system that he set up himself.

Now, even though he cannot (yet) write code, he has a online web-business (not eBay), carries no stock, spends half an hour a day on his business and earns the equivalent of a good adult full-time salary.

He just turned 17.

One man’s lean …

I don’t know if you follow the startup scene, but you will see a huge movement to the concept of ‘lean startups’ as championed by Steve Blank and Eric Ries.

However, one man’s lean is just another man’s bootstrap.

That’s not exactly correct: bootstrapping a company generally means starting it without much / any outside finance and launching it on the smell of an oily rag.

For example, Guy Kawasaki famously started Truemors with just $12,107.09 …

… if you know Guy [AJC: he's an early Apple employee; founder of garage.com one of the original Silicon Valley angel investing firms; and, author of a number of 'must read' business best-sellers including 'Art Of The Start'] he could certainly afford to pay more to start his business … a lot more … he just chose not to

On the other hand, creating a Lean Startup is more about talking to customers before spending money than simply looking for ways to cut costs. But, there’s nothing new in this … it ‘s just – or should be – common sense.

Let me explain with an example from my own business life …

When I first came up with the idea for my business – the one that I eventually ran in the USA, Australia, and New Zealand and subsequently sold for many millions – I had NO experience in the field.

It was just an idea that I got from working in a slightly-related industry (via my other business that I still own today).

However, rather than jump out and launch it, first I did a few things:

1. I found a business in the USA that had the same idea and had been ‘doing it’ for at least 10 years. I tracked them down and flew to the USA and met with the founder. He happily helped me understand the business.

That’s when I undertook my first ‘pivot’.

A pivot is another one of those sexy, new-fangled terms for something that every startup founder who eventually succeeds fully understands (and, those who fail have never worked out for themselves) that says: your first idea sucks.

It’s only once you TALK to clients and competitors that you will KNOW what to build. And, my original idea was not IT.

2. Aside from a new perspective on how to build my business idea, the second thing that I got from the US business’ founder was some industry data. But, it was for the USA.

Being an analytical type of guy, I decided to find out what these numbers would look like for Australia. Basically, they were to support our marketing message by providing backup industry data. Since there wasn’t any in Australia, I set out to adapt the US version by doing my own research.

Once I had this research in hand, I decided to try my hand at writing my own press release (I couldn’t afford a PR agency) and sent the 4 page report that I wrote out to a couple of business magazines.

By some miracle, I ended up with a full page article (including photo of a very young-looking AJC) in Australia’s most prestigious business weekly (think Forbes for Australia). I was quoted as “Australia’s Expert”, yet I hadn’t even handled one single transaction!

3. On the back of that article I was approached to produce a 2-day course on the subject matter of my report. The company was affiliated with a major Australian university (people attending my course received credits towards their professional accreditation) and I was paid $1,000 per course to deliver it! Yet, I still hadn’t handled even one transaction.

Those things not only proved that my idea – and, unique approach (as taught by my new US colleagues) would work in Australia, and that there was definitely market demand … it also brought me my first 5 ‘Fortune 500′ customers!

So, I had found an idea, researched the best way to implement the idea, promoted the idea, sought market feedback (i.e. was somebody prepared to pay money to learn about and/or use the idea), and signed up my first customers …

… only THEN did I set about to build the actual business: hire staff, build software, etc., etc..

Now, that is what Lean Startup really means

When is a JV not a JV?

Last week I wrote about joint ventures (JV’s) in real-estate; personally, I don’t like ‘em but I showed you the right way and wrong way to enter into one. You should also read the comments.

Today, I want to share an interesting e-mail discourse that I had with another reader who wants to set up  what he calls a “JV with a manufacturer”.

Firstly, what he proposed is not a JV; to me, this is one of the most overused terms. He wants a manufacturer to help him design, then manufacture a new product.

What he is setting up is a supply chain relationship, not a joint venture.

To me a JV occurs when both parties take significant risk in the ‘venture’ and in some way share the upside / downside risks.

An example might be where you come up with an idea for a new product (as this reader has) and approach a manufacturer who is willing to take your sketch or prototype and turn it into a manufacturable product at no cost to you. Or, if at cost, then the cost is shared to some significant portion, say 50/50. In return, you pay the manufacturer a (hopefully, reduced) price for the finished product + a % of sales (better yet, % of profits).

I had a number of true business joint ventures: these are when two businesses create a third business party owned by both (it need not be 50/50, in my case one was 51/49 and the other was 40/60). In a true JV both parties bring something significant to the table that makes the JV better than either party going it alone … in our case, my business brought niche industry expertise, unique software and processes and the other party brought infrastructure, client relationships and customer service.

However, if you’re thinking of entering into a JV I can only point you to a conversation that I had just prior to signing my first one:

I was on the plane with a friend heading to see the Rugby World Cup in Sydney. I told him about my plans for a series of JV’s to help me expand to other countries. He cautioned me that he was privvy to a study that showed that JV’s were successful proportionally according to size-parity between the the parties.

The corollary was that where one party was tiny (my company, at that time of 30 employees in Australia) and the other large (my $2 Bill. multinational proposed JV partner) JV’s generally did NOT work … the small guy was almost always swallowed up by the big guy.

In my case, the JV’s actually did work, but they were difficult to manage and even where I held majority ownership (as in the USA JV), that did not translate into effective control.

In the end, it all worked out well for me and for my JV partner, but always remember: it is very difficult for a fly to steer an elephant.

Why most business owners are not wealthy …

There is a very simple reason why most business owners are not wealthy.

Can’t guess?

I’ll give you a hint: the secret is in this statistic:

According to the US Census Bureau, in 2008 there were 27.3 million businesses in the USA. Of these 21.3 million have no employees.

Think about it, 78% of all businesses in the USA have NO employees.

Now, some of them may be bloggers. Some may be eBayers. Some of them may own niche eCommerce sites. But, I bet that the bulk cut hair, mow lawns, see patients, and so on.

They don’t have employees because they offer a relatively simple service: writing, middle-manning, mowing, cutting, diagnosing …

You get the picture.

They are not wealthy because service businesses are very limited in how much revenue they can generate.

Generally, they are a job – albeit a lucrative job for a lucky few – nothing more. And, if these service business owners don’t put in place a very aggressive savings/investment strategy they will never become wealthy.

Ramit at I Will Teach You To Be Rich tells the story of Mark who quit his high-flying day-trading career and gave away his entire $1 mill. net worth just to prove that getting rich (sic) the first time around was no fluke.

Really!

You should read his story here.

What struck me is how Mark has now created a nice little kitchen table business for himself:

“I was surprised,” Mark recalled. “[by] this little, easy thing that I can do in an hour. [My clients] want me to hacker test their site and give them a logo to put on the bottom of the site when it passes.” Depending on his schedule, Mark contacts about 15 leads a day. He adds the rest to his growing lead database.

Can you see how Mark is building a nice little service business; contacting 15 leads / day, which I guess allows him to service 7 or 8 in a day (if half convert into paying customers, and if it takes him 1 hr to do each, and if he can do all his other biz admin/marketing after hours)?

What can he charge?

If as much as $99 each (I’m guessing, here), that’s still a nice little earner of $700 / $800 per day or $160k per year!

Again, nothing wrong with that, but hardly likely to make him wealthy, unless Mark does one (preferably both) of two things:

1. Save 50% of his $160k pre-tax income and invest in income-producing assets. Remember, Mark has to generate $1.6 million of assets for every $80k of retirement income that he needs. Oh, and he needs to double that number for every 20 years before he intends to retire to account for inflation,

OR

2. He has to Productize His Service.

This simply means converting his low growth service business – that probably can only be sold for a small amount (typically one to two years’ revenue) – into a high growth ‘real’ business that can be sold for a much higher $$$ figure.

How so?

It means taking Mark out of the picture. By that, I don’t mean replacing Mark with somebody else, I mean making Mark’s – or, his replacement’s – labor secondary to the real purpose of the business.

The benefits of doing this are two-fold:

a) Mark can go on vacation, and

b) the business can scale as big as Mark likes.

Let’s take a closer look at how this might work for Mark:

Mark said that his customers “asked for this little, easy thing that I can do in an hour. They want me to hacker test their site and give them a logo to put on the bottom of the site when it passes.”

If this is really the case (and, I’m not sure what is actually involved, but let’s go with it for the sake of this post) then Mark is really selling a product, not a service: the product is the “logo to put on the bottom of the site”.

Verisign, for example, makes hundreds of millions of dollars a year putting logos on the bottom of sites to indicate that they are secure; it sounds like Mark is doing something very similar.

And, that’s what the customer wants: a  logo.

Why do they want a logo?

Well, they really want what the logo represents: whether it be for their own peace of mind (e.g. “my site can’t be easily hacked”) or – more likely – for their customers’ peace of mind (e.g. “I can buy from this site, my info seems pretty safe from being hacked”) The service that Mark offers (i.e. to test the site) is simply the means to that end: if the site passes the test, they get the logo.

And, if they get the logo … then they (and/or their clients) get peace of mind.

Since it helps his customers to sell their own products from their own web-sites, Mark should be able to sell this ‘seal of approval’ for $19, $29, $49, $99, maybe more … maybe a LOT more.

In fact, it should be relatively easy for Mark to create a web-site in WordPress to act as the ‘front window’ for his new product-as-service, and do a bit of side-by-side testing (called ‘A/B testing’) to find the optimal price point.

Now, what about all of that “easy thing that [Mark] can do in an hour” stuff?

Well, since his customers are really buying the ‘stamp of approval’, and the work is easy to do, Mark should be able to train just about anybody to do it! Assuming that it can be done remotely, Mark should be able to use freelancer.com or odesk.com to outsource the work offshore. Cost $4/hr.

Mark’s gross margin should be anywhere from 80% – 95%, which is very typical for web-enabled ‘productized service businesses’ (more commonly known in the software world as Software as a Service or SaaS).

Now that Mark has a high gross margin SaaS business on his hands, he should switch his role to marketing and scaling it using the methods that every other successful SaaS business uses.

No more finding/chasing individual leads and personally delivering services in one hour increments … and, Mark may eventually find that he has a multi-million dollar web-business on his hands.

No fluke, after all. 

Bragging rights …

Some of my readers want to hear more on the business / startup front, which is where I have spent most of my working life …

…. but, it’s important to realize that the vast BULK of my $7 million that I made in 7 years (starting from $30k in debt) was made from investing – primarily in real-estate and stocks (mainly real-estate).

[AJC: That's not to say that I didn't make a lot from business as well - in fact, I exited three of my businesses to a UK listed company. But, that came a couple of years after I made my first $7m7y.]

Anyhow, since business is an important avenue for many of my readers to increase their income (so they can invest more), I like to offer the occasional tip. I love this one from Venture Hacks (via Twitter):

Why do companies brag about how many employees they have? They want to spotlight their inefficiencies and poor leverage? http://vh.co/euaB2h

Why indeed?

Number of employees is another example of what Eric Ries calls a vanity metric: a number that makes you feel good, makes your investors feel good, makes your bank feel good, even makes your wife feel good (and, your friends envy you) …

… but, tells you NOTHING about your business. At least, nothing actionable.

If more employees is good, then add employees to grow your business!? I don’t think so … adding overhead is a great way to go broke.

I have personal experience with this; back in 1998 my business was growing gangbusters:

I started with 4 or 5 employees, then won a couple of contracts in quick succession.

So, we rented a new building – our first ‘professionally fitted out corporate-style offices’ [AJC: actually, the 'gentleman farmer' who owned the building rehabbed the office himself ... I mean, he and his sons wielded the hammers, nails, drywall, paint, etc. themselves! But, that's another story ...].

It was an 8 year lease, but something in the back of my head told me to negotiate for flexibility, so I pushed hard and got 4 by 2 year leases (our option to extend each renewal) instead.

Surprisingly, we grew from 5 to 16 or so within 2 years and were busting the ‘new’ office at the seams.

So, I scrambled out and hastily bought my own office (cost me nearly $2 million after fit-out), and I determined not to make the same mistake again: we moved into the office with 22 people but I fully / completely fitted it out, including workstations, phones, and so on for 50 people.

I made my self Growth Ready.

And, it worked!

We won more contracts and grew to 30 people. But, there was a catch …

We weren’t making money. The bigger we grew, the more money we lost.

I slowly came to the realization that my business didn’t have a Break-Even Point … our operating cost (i.e. expenses) was directly related to our revenue: the more we earned, the more people we needed to fulfill our service, the more money we lost

Luckily (!) we lost a major client and had to cut heads from 30 to 20 … it was a sad day for me.

Ultimately, though, it proved to be the first major turning point for our company: we created a new technology platform that allowed us to quadruple our business with fewer people; in fact, we maxed out at 22 after quadrupling our business.

Needless to say, we were suddenly – very – profitable.

So, now I was in an interesting position …

I could no long brag about having 30 staff … but I was rolling in cash, but who likes to brag about money to friends?

What would you rather have?

The vanity metric or the bottom-line results that come from understanding what really drives your business … then, doing it?