Shattering the Rose Colored Glasses

Have you ever met someone who had a lot of passion? It is inspiring. A person with an ardent belief that things will work out possesses a magnetism that is intoxicating and contagious. A lot of people like this become business owners, and it is understandable. If you are good at XYZ, you will want to found a company that is the best at XYZ – like a chef wanting to open her own restaurant. But while these incredibly heartfelt and adrenalized people are great to get a drink with, I am always wary of them as business owners. In my experience, people like this are not successful.

I learned early in my career that the whimsical fantasy that everything will fall into place is not how things work. Focus and dedication are the building blocks to success. While attitude is important, as discussed in my piece “Waking Up the Right Way”, it is important not to take the positivity too far. Don’t get drunk on the concept of success. Take off the rose colored glasses and focus on what matters.

The truth is that businesses are made up of a handful of fundamental elements, and very few people prioritize those fundamentals. When I am talking to an entrepreneur or business owner, I am always shocked to find that most of them can only list about 50% of their expenses off the top of their heads. How can you expect your business model to work from a basic expense vs. revenue standpoint if you do not know what your expenses are? If you do know what your expenses are, then what are your profit margins? Can you scale it? What is the cost per customer acquisition? Retention? How many times do you need to rinse and repeat in order to reach your goals? An entrepreneur with a complete financial understanding of their business and actionable goals for growth is going to be a success. Everyone else is just gambling.

Lately I have noticed a lot of new businesses focus on corporate culture and stunt marketing initiatives. Google ushered in the idea of a fun working environment, one with free daycare and ‘”red pants Wednesdays”, but a small business trying to replicate this is fundamentally flawed. Instead, stay laser focused on profitability and everything else will follow. I speak from experience; both Currency Capital and IM Capital Access (companies that I founded) were named on the Los Angeles Business Journal’s Best Places to Work. I achieved that by building profitable businesses, not by focusing on employee engagement initiatives. Once the companies were making money, I was able to treat my employees to fun activities and daily perks. Building the business the other way around is a trap. I firmly believe that a positive work culture is the result of how the company is doing financially, and that it cannot work the other way around.

So the next time you find yourself blinded by passion and positivity, pause, and ask the questions that really matter. Remain sober and unemotional, and you may be able to identify some foundational cracks before a venture can turn into an unstable disaster.