There is one single, golden moment that will change your life as an entrepreneur.
No, it has nothing to do with finishing your product — though having something to sell never hurts.
No, it’s not the day you move out of the hovel you have been holding up in into a place with desks and chairs and running water.
No, it’s not even when you get your first customer — whichever half-insane person you managed to convince to test out your dream and actually pay you for it.
All of these are necessary, beautiful moments but none of them will really change your life.
What’s the answer then?
To get there, I am going to need you to do me a big favor and take out a sheet of paper. I know, stay with me here. Now, write down everything that you spend money on in a month. Everything, even down to that pint of Triple Chocolate Ice Cream you buy to help make the voices in your head go away.
Now, add up all of these expenses and think about what your life would be like if you knew, beyond a shadow of a doubt, that the income you made from your business every month would cover them, that you would never have to worry about anything on this sheet again.
If that is a smile on your face then you get it.
Entrepreneurs tend to dream of the millions they will one day make, and the ignore the fact that millions very rarely brings happiness. What does bring happiness is peace of mind, knowing that to the degree that you can be, you are safe, secure and generating the income you need to live the life you want to live.
In the parlance, this calculation of income versus burn rate is called “runway,” the amount of space you have left in your bank account before your business becomes insolvent. The moment, the very second these numbers match, your runway becomes infinite and you can stop worrying so much about whether you will have a roof over your head and stop fretting about the long-term effects of subsisting on double cheeseburgers.
Instead, you can start thinking about growing your business with the patience and foresight that is required to be successful in the long term.
What’s the lesson?
Before giving in to your champagne and cavier dreams, take some time to explore the reality of your runway and start making plans to expand it even if it means putting off the Benz for another few months.
This was AMAZING Steve, touched me like Entrepreneurial articles rarely do… right down to my core… I love this and I did experience that smile you talked about 🙂 Thank you for helping me put it all in perspective!
Thank you so much for the -very- kind words, I really appreciate them. I’m also glad you got something out of it, writers so very rarely know for certain.
I hope you are having a fantastic day!
You offer some very sage advice!
A few years ago, a newly organized group of CEO’s of emerging companies (read entrepreneurs) invited me to facilitate a meeting to help them build a support group for each other. When I arrived for the meeting, the parking lot was filled with the Mercedes, BMW’s and Audi’s of the CEO’s at the meeting. And by the way, each had a huge mortgage payment to make each month as well. Not surprisingly, most of the angst that the members of this group had was about the financial viability of their business. These entrepreneurs seemed to measure their success by how quickly they could accumulate their outward symbols of “making it”. What was missing was the concept of the “runway” and the focus on “growing your business with the patience and foresight that is required to be successful in the long term”.
It’s amazing how even “professionals” can miss these basic points. Good comment.
This is usually the hardest thing for successful people to get behind. You assume that your business will grow forever, so why not just borrow against your future success?
That’s also why so many small businesses “blow up.” I think smart entrepreneurs understand that people are very bad at predicting the future, and so they keep their expenses and their lifestyles in line with those things that they have control over.
Great comment!
I nice concept with the runway although on my piece of paper I had to write triple chocolate icecream x 6. I am weak.
Ha! Erm, uh, consider that motivation to build an even more lucrative business. Yea, that’s it exactly.
Well written – it’s interesting in a nomadic life because you can shift location and really change your burn rate dramatically. I have an infinite runway in some countries already, now I just need to raise the bar to cover more of them!
That’s actually really fascinating. Which countries have you found it’s “easiest” to live in so far?
I haven’t gone long term traveling yet, but often spend 2-3 weeks at different places. Most recently I have been in Sydney, Brisbane, Geelong, Austin, San Francisco, Vancouver and a few different places across Melbourne where I am based. When I say infinite runway I’m referring to countries like Thailand which I visited last year – they’re not on the radar at the moment but I’m sure they will be again soon. I’m not sure which cities are easiest but I prefer being somewhere relatively warm, by the ocean, with good coffee and of course decent 3g data signal! Right now that place is St Kilda = http://www.flickr.com/photos/cyberhill/2929214482/
Well said Steve. This is where I’m trying to get my business to.
Thank you! Good luck!
Great article Steve. I’m just at the point in my new business where my runaway is bigger than my expenses and life is starting to look great.
It’s really hard to realize how much better things suddenly get until you stop having to worry about whether or not your rent is going to get paid. When you get passed that, suddenly all of those ideas you’ve been sitting on suddenly get new legs. Thanks for reading mate.
I haven’t even delved into my own business/freelancing yet, but I am *definitely* looking forward to being able to afford my racing habit with a nontraditional job! 🙂
Holy guacamole, you race? That’s actually incredibly cool. That’s a pretty slick goal to be shooting for, I wish you luck.
I think some people overshoot by just looking at the millions and it reminds me of that quote about food, “your eyes are bigger than your stomach”. While it is great to dream big and sometimes absolutely necessary, you gotta sometimes stop and think, is that what I really want. Does it align with my true goals in life. We should all strive to hit that runway.
Exactly. People assume vast sums of money are good in and of themselves, and never ask themselves why they need it or what they would do with it in the first place. Sometimes a little extra time might be worth a thousand times more than a lot of extra money. Thanks so much for the comment.