Every good entrepreneur has to ask themselves: what am I building toward?
The idea of an acquisition is one every entrepreneur thinks about from time-to-time, and Alyssa and I are no different. This was a topic of many of our conversations for several months. I’m fairly certain both of us already knew where we were headed, but it seemed smart to at least explore the option of building a business to sell. We sought out advice on the topic and discovered that there are three main reasons businesses like ours are acquired: client base, leadership and human capital. We also learned that in our industry, profit margins need to be between 20 and 30 percent to make acquisition a realistic possibility.
We fairly quickly recognized that if we chose the road to acquisition at this point in our business, we were going to have to tip the scales toward the money side – and though we are both committed to building a profitable business, this was going to change the fabric of the company we’re aiming to create.
If acquisition wasn’t our goal, we had to contemplate our other driving forces and answer the question: What is our end-game, anyway? Is it to position ourselves to be the go-to firm in a certain industry or service area? Or to build a company that spans multiple states? Or are we leveraging technology and creating processes that are proprietary only to Prosper?
The long and short is that all companies, regardless of their end-game need to define their goals and the outcomes they’re looking to achieve both short and long-term to either build a sustainable business or one that’s ripe for acquisition. For those of you in it for the long-haul, here’s what we came up with:
Continue building a company we could sell
My dad, an entrepreneur with 35 years of experience, always told me that he loved when his competitors tried to recruit his best employees away. To him, it was a sign his team was made up of the best in the business. Of course he would have to fight to keep them, but he didn’t mind.
I believe just like you want to build a team worthy of stealing, you want to build a company worthy of selling. Running your business as if you’re going to sell forces you to operate lean and stay ahead of the innovation curve – if you’re not an appealing suitor for someone else, you probably have some work to do and this mentality ensures you aren’t getting too comfortable in the day-to-day.
Always seek the next challenge
I’m reading Creativity, Inc. (the second of two books Alyssa gave me at the end of 2015), by Ed Catmull. He’s the president of Pixar Animation and Disney Animation. Next to Walt Disney himself, he might have one of the coolest jobs in the world, not to mention he got to work alongside Steve Jobs. Ed’s dream was to create the first-ever animated feature film. He did that and more with the releases of the Toy Story movies and A Bug’s Life, and he describes the exhilaration he felt in achieving his life’s goal. However it was almost immediately deflating. After accomplishing what he had set out to do, he felt he had lost his sense of purpose.
I’d spent two decades of my life building a train and laying its track. Now, the thought of merely driving it struck me as a far less interesting task.
This struck a chord. As an entrepreneur, you have to constantly search for new challenges to overcome. My latest? How do we scale Prosper Strategies in a way that doesn’t take Alyssa and I all the way back into the weeds? When I always have a problem to solve or a new skill to learn, I can continue laying the track toward somewhere better.
Tip the scales toward love
It’s a careful balance: love vs. money. Even though we’re not positioning to sell (today anyway), building a profitable business has to be our number one goal because that’s what enables us to employ our rockstar team and invest in Prosper. However, one of our rocks for 2016 is to do more of the work we love, and this is actually a key part of our growth strategy. A profitable business allows us to be even more selective about who we work with: changemaking companies that want to use marketing as a force to drive more revenue and as a result, make a greater positive impact. Success breeds success and our ability to be more discerning drives our sense of purpose, our own impact and, in turn, our profits.
So, what’s your end-game?
