The Dark Side of Business Growth
by Joe Kalis
Some believe that “the American Dream” is to own your own business and grow it up to the moon…which supposedly will create massive riches and nobody to tell you what to do!
I’m coming to you with some reality…at least in my case…I don’t think that’s possible for the majority of people…only becoming possible once you have a huge pile of money that can generate more money. Getting to that initial huge pile is way harder than some people make it seem.
Every few months, as my brother and I continue to grow our company and launch new projects, we’re continually presented with additional challenges, and things that happen that I never even thought of that just make me shake my head and say, “What the actual f*$%!”. If you’re a business owner, I’m sure you’ve been there a few times.
So this is my ongoing (and will be updated as I reach more of these milestones) list of real-life struggles that go along with the excitement of growing a business of your own.
1. You don’t have a boss, but the business owns you. When you decide to trade in a “comfortable” job to be your own boss, EVERYTHING immediately falls on you. No longer are the days of schlepping around the water cooler just wasting time because you’re getting paid a salary regardless of your actual production…you are now solely in charge of making the donuts. If you (or your partners/employees) don’t produce, you don’t earn. If there’s an emergency at 9pm, it’s all you…even if it’s time to tuck in your kids.
Also, in my experience, it’s nearly impossible to stop thinking about your business…which isn’t a bad thing entirely, but just introduces some new habits you need to form so that you can actually be present with your family, if that means anything to you.
2. No benefits. As a new entrepreneur, at least, there is no benefits package. This means much more to some than others, but realize that the things you took for granted at a job are no longer available to you — paid vacation, discounted insurance, 401K, pension, etc. Once you establish yourself in business, you can obviously build in a benefits package for yourself and/or your employees, but as the business owner, it all costs more and there’s a LOT more administrative bullshit behind it.
3. Taking money (in any capacity) from an outside partner requires you to relinquish more control than you’d probably like. When my brother and I started our little enterprise (I was still working full-time), I didn’t really know what it was going to become. As you can imagine, there’s no way I could have predicted we’d have taken this particular path, and ended up where we are today. I’m extremely thankful for it, and excited, but there are always things you wish could be different.
As we built our “marketing funnel” and started to utilize Facebook ads to get more leads, our little enterprise started performing incredibly well. We dropped every nickle of cash and credit we had into it, as we generated leads for a funding company and then had to wait for them to close deals so we could get paid, in order to pay for more ads and leads.
At that point, the owner of the company we were sending leads to offered to partner with us, by way of providing his credit card, in order to scale the campaign further than we could have possibly imagined. We were dancing with excitement, as the angel of finance had come to take our troubles away!So, we took the credit card and scaled the project, and it’s truly been fantastic. HOWEVER, at the moment we did that, we gave up control of what truly happened with the campaign. Not our money, no longer 100% our decisions. This whole operation has provided us a decent (comfortable) living for 2 years, but we do not have the power to “take it to the next level”, as we’d like to, since it’s not our money.
4. Scaling a campaign delivers “diminishing returns”. In the beginning stages of our campaign, we were spending $100/day on Facebook ads, which, in itself, is no small potatoes. We were creating leads and sending them to a sales floor who handled them, and they were closing them at 3%. Not bad! When we made the decision to “take the magical credit card” (see #3), it meant we could scale the campaign to, ultimately, $3,000/day. HUGE ad spend, HUGE amount of leads. Essentially, we went from providing 5-10 leads per day to a sales team… to providing 150/day.
Naturally, this introduced about 10 more employees, tons more administrative headache, and naturally, the lower amount of attention given to each of our leads. Our closing percentage went from 3%+ down to 0.5-1% in any given month. This is fine and well, except that when we were back at the $100/day level, we made projections of what sort of income would be generated at $3,000/day with 3% closing rate, and quickly went off to plan which island we were going to buy in 12 months. So…just keep in mind that as you scale, you get a lower conversion rate.
5. As your email list grows, it becomes WAY more expensive than you’d expect. I remember as our email list was growing that I was excited to tell all my friends and fellow business owners that I was approaching 100,000 people on my email list! That’s a ton, and I was truly excited.
Until, that is, I was informed by my software company that once you go past certain levels of contacts and emails sent, you start getting charged more. Now, I’m a very smart person in general…business smart, specifically…and I never even thought about that until it happened. I went from an already tough-to-swallow $297/month for my CRM to now over $1500/month to handle the volume of contacts and emails sent…and honestly, this is peanuts compared to the real players I’m friends with.So, just realize that as your revenues scale, your expenses do, too. For some reason, I never made that correlation until it happened.
6. As your email list grows, it requires WAY more horsepower from your hosting company. Last night, I sent an email to 120K asking them to click a link to go to my WordPress website in order to confirm that they were still interested in being part of our community, and the response was so positive (our goal), that we completely crashed my hosting server.
You see, a few months ago, a moved from a very basic, mom-and-pop sort of hosting company to a more “business-y” one, signed up for their basic package, and figured I was all good. Last night, after chatting with support about why all of my sites were down, I was informed that the basic package at this more business-y company wasn’t nearly enough for the traffic I drove to it just 2 hours previous. So…yeh. Good problem to have, I guess, but I wish I had known that traffic from 120K emails was going to cripple a business-level hosting server.
7. Being “comfortable” is a curse. There’s an ongoing debate in our circles between if any given business owner would like to have a “lifestyle business”, or an “empire”.
A lifestyle business is essentially where you generate a “passive” income stream, enough to live a good life and brag to your friends that you make more than them and you don’t actually do any work. An empire is essentially where you amass wealth, by way of building/purchasing multiple companies and/or holding a ton of real estate or other financial investments in a portfolio.
My brother and I change our mind on which of these we want, almost on a weekly basis…but we technically HAVE a lifestyle business at the moment. We are very “comfortable” with the money we make, and because it’s based on an online system that generates leads for a sales floor we don’t manage, it essentially runs itself at this point and we see commissions whenever a sale is generated. Yes, we have to maintain it and attempt to tweak it as much as possible, but we don’t HAVE to touch it, and it still generates based on the effort of others. It’s called building leverage, however, it could end at any point in time. So, since we’re “comfortable” with the income it produces, we aren’t nearly as hungry to work a 12-hour day as we probably should be…choosing instead to work a few hours each day, and devote ourselves to our family. In this sort of scenario, it becomes very difficult to “build an empire” unless we purposely take away the comfort we’ve afforded ourselves to take things to the next level.
So, that was me puking out things that go through my mind on a daily basis about the world we’ve built for ourselves…and I will continue to add to this as I think of more “secrets” of growing a business that people with rose-colored glasses never really think about.
November 18, 2016
August 12, 2015
August 1, 2015