Don’t be caught unprepared. Make sure your dreams of the future are backed up by good business strategy.
My question to you is, are you telling yourself a good story, or are you executing a strategy? I think that many of us, and I totally fall into this camp, but many of us tell ourselves a great story. Next year, we’re going to grow by this much. Next year, I’m going to do this. Next year, things are going to be better, or, I’m going to build this company and one day I’m going to sell it and I’m going to be rich, and that’s going to be my retirement.”
Let’s use that as an example. Telling yourself a good story is, I’m going to build up my landscape company and eventually I’m going to sell my landscape company for a great amount of money. In fact, I think I’ll be doing $3 million in landscape business by then, so I’ll probably sell my company for about $3 million, and then we’re going to make 10% interest on our money. I’ll make about $300,000 a year. We’re going to live an awesome lifestyle. Things are going to be golden.
Strategy says that, no, not really. Your landscape company is probably going to be worth about 10 to 15% of gross sales plus assets, and you’re not going to make 10% on your money after you sell your company because well, you can’t make 10% on your money unless you’re in more aggressive assets, investments, and you’re probably not going to want to be in more aggressive assets or investments like that later in life. You’re probably not going to do that unless you’ve really been spending some period of time in your life learning investing, and you probably will need a diversified portfolio across real estate and equities and stocks and bonds and a few other things. A great story is, you’ll retire with $3 million and make $300,000 a year. Reality is that you’ll retire with $550,000 and you’ll make 3% interest on your money, and when you try to get a more aggressive return on your money, you’ll be at high risk of losing some of your money.
I’m not saying you can’t get higher risk and I’m not saying you can’t sell your company for more money, and that’s where strategy comes in. Strategy is an awareness of what reality is. It’s looking at, strategically, if your goal is to exit with $3 million in the future, could be 10, 20 years from now, then are you building the kind of company that can yield $3 million in revenue or $3 million at the time of sale? You shouldn’t be in landscape. You should be in fertilization and weed control, pest control. You should be in something that can actually yield a much, much, much higher value that’s desirable by other companies that want to buy it.
Oh, and by the way, if you’re going to be selling in 10 to 15 years, you’ve got to take a guess at what might the market want 10 to 15 years from now. You’ve got to be willing to change your business model as the years go on to make sure that your company is doing what other companies want, what they want to acquire. Then if you want to earn 10% interest out into the future, you need to be dabbling right now in some different things and going through the process. You need to be learning a little bit about real estate. You need to be learning a little bit about investing. You need to be figuring out a lot of different things because you don’t want to play with your $3 million to figure it out later. You want to play with a little pile of money now and learn the lessons you need to learn and figure out what you like and don’t like now.
That’s strategy. Strategy is figuring out your vision in the future, figuring out what your goals are, and then looking critically at how you get there, and what reality is, and making sure you’re telling yourself an accurate story, not just one that makes you feel good and makes you comfortable. I think a lot of us, business owners and entrepreneurs that are optimistic and are dreamers and can make things happen, and we’re salespeople, we are good at telling ourselves stories. We’re good at saying, “This is how I think it’ll be. I feel like this could be the case.” But we don’t dig in and look to see if that’s reality. When you dig in and look and you make a plan and you back into it, that’s strategy. And if you want to achieve exactly what you want, you have to be playing your game strategically.
It can’t be based on emotion. It can’t be based on feelings. It can’t be based on, “I hope this is how the world is going to be someday when I get there,” or “This is how things should be.” It’s got to be based on strategy. You’ll be much, much, much happier with the outcome if you look at everything strategically.