One of the most common motivations for starting a business is making money; entrepreneurship affords you the opportunity for practically unlimited income. If you own a business in full, there’s no limit to how much money you can collect in the ongoing profits or eventual sale of the business. Accordingly, most entrepreneurs start their business with profitability as a main priority—the faster you can generate a stream of revenue, the
Still, making money shouldn’t be your only goal, nor should it be your first goal, as a business owner.
The Issues
Let’s take a look at the main problems associated with focusing too much on making money:
Fundamental blinding
There are dozens of influencing factors that will dictate the success of your business, including basics like supply and demand, and the number and type of competitors who share the market with you. If your only focus is on how to make money as quickly as possible, you won’t pay as much attention to the interactions of those fundamental influencing forces.
Every business move you make is a game of probabilities, much like making trades in the stock market. Your goal should be coming up with a strategy that allows you to maximize those probabilities in your favor long-term, rather than making quick trades in the hopes of turning a quick profit. Losing sight of fundamentals in favor of revenue can make you neglect major components of your business.
Short-term thinking
Profit focus is also a problem if it drives all your decisions to cater to short-term fixes and offers. Obviously, you’ll need to strike a balance in your company; if you only make decisions that will play out in the long term, you might not generate enough cash to keep going long enough to make it to that distant goal. On the other hand, if you’re only worried about making money in the near future, you could compromise the entire structure of your business because you weren’t willing to invest in it.
Passion and motivation effects
Entrepreneurs are a diverse bunch; they’re motivated by very different factors, and that’s mostly a good thing. If you’re motivated exclusively by money (which is rare), you’ll be discouraged every time your profitability is threatened, and more importantly, you may not have the energy or focus necessary to resolve some of the less logical problems that plague your business.
If you’re motivated by money and another factor—for example, let’s say it’s the autonomy of the position—if you focus too heavily on turning a profit, you may eventually lose sight of your other passions. Passion and motivation are important to guide your decision making, and also stave off the negative mental effects of prolonged exposure to unpleasant conditions, like depression and burnout. In other words, if revenue and profitability are the only guiding forces in your business, you’ll be at higher risk of losing all motivation and burning out prematurely.
Alternatives to Focus On
So if making money shouldn’t be your main goal when starting a business, what should your main goal be? There are several options here, but these are some of the most appropriate candidates:
Stability
Stability requires you to focus on revenue—but only to the point where you become self-sustainable. The goal here is to ensure your business is able to run somewhat autonomously, operating efficiently enough that you don’t burn through your cash reserves. As long as you have a decent flow of cash from new sales, or enough investment capital, you can achieve this.
Reputation
Your brand reputation is another factor that deserves your primary attention; the goal here is to convince your audience that you’re a brand worth trusting for the long term. This will improve your customer retention and set you up for a more stable, brighter future, but it also often means sacrificing some of your profitability in the short-term; for example, you may want to offer fairer prices by slashing your margins or spend more money to make things right with an angry customer. Here, your values matter more than your profitability.
Growth Avenues
For most businesses, there are multiple paths of growth that can be pursued. Identifying them, and preparing for them, is more important than revenue, since in most cases, future revenue potential is far higher than short-term revenue potential. In other words, securing a place for the future of your company is more important than trying to make it profitable immediately.
Competitive strengths
You may also want to focus on perfecting certain components of your business that allow you to outcompete your closest competitors, especially if you’re entering a highly competitive field. If you have many fierce competitors, it may be a fool’s errand to turn a profit immediately; it may be better to undercut the competition with attractive features like lower pricing, eliminate them, and focus on profitability only once you’ve established yourself.
Internal core competencies
In a similar vein, you can also focus on building up your internal core competencies; in other words, you’d focus on hiring the right people, building the right processes, and creating a powerful enterprise engine before attempting to maximize profitability.
Finding Balance
None of this is meant to imply that making money shouldn’t be one of your main goals, or that you shouldn’t make money at all. In fact, there are countless examples of businesses that started with a minimum viable product with the sole intention of generating revenue as quickly as possible—and many of them ended up being smashing successes.
Instead, these thought experiments and alternatives are meant to illustrate the fact that revenue generation, by itself, isn’t enough to guide a business to success. As a goal, it needs to coexist with your other, long-term goals, and it shouldn’t be the only motivating force for your enterprise.
