For many years I thought passion was all I needed to have success with my business. It is not true. Entrepreneurship (my personal definition mind you) is the balance of organization and structure with innovation and creativity in business. Can you really be too creative? Too market driven? Is it really that wrong to innovate constantly? Many entrepreneurs love the idea of being business. They love their invention, the technology, the notion of being in charge and out on their own. And I hear it all of the time. “Love what you do and the results will follow”. Of course, there is something to loving how you spend a majority of your waking hours. If you hate it, success is possible but not sustainable for long.
I am living proof of passion over profits. For many years, I pursued growth at all cost! (I am proud to say I am reformed growth junkie today.) I misunderstood the importance of running my company for profit. To leave money in the company. What did I do? I would reinvest it. Many times before I had it in hand! I have missed the point. I thought that top line revenues mattered more than anything – and frankly our egos and pride get in the way! Growth becomes intoxicating, but profits mean choice. They give you a point of comparison in our industry or market. Are you adding value more than your competition?
So few companies make it past the first few years and I have gotten clear as to why:
1. We don’t know our numbers. As hard as it may seem, we don’t set and run our business to make money. We pursue growth. Growth takes cash. Fast growth often chokes a company. We spend our profits on growth.
2. We don’t realize that profits can drive innovation and investment. Most organizations have been damaged coming out of the recession. When facing new and big business opportunities few organizations have the reserves or resources to invest in new business opportunities!
3. Our business strategy is the walking dead. Having a company that survives each month to the next one is common for most companies in the early years. But when do you need to look at making changes? Leaders find it hard to make tough changes to a business strategy, but business is designed to be profitable and must create a fair return for stakeholders.
4. When an entrepreneur is the only stakeholder, we rationalize. Sometimes there are advantages to having other investors. I see entrepreneurs spend their life savings to invest in their business and to keep their business and dreams alive. However, business make money eventually!
So don’t get me wrong. Passion is a part of our purpose. And our purpose is why we get out of bed every day and go to work each and every day. But passion must be balanced with profits to have something sustainable for customers, employees, and stakeholders.