Own Your Business Model To Avoid The Futile Grind

Every entrepreneur has a grind to conquer. Is yours worthwhile or futile??

The key ingredients to determining this are your business model and product-founder fit. The former simply speaks to whether the profitability numbers make sense even if you perform optimally. The latter challenges whether building that product or service fits your innate skills and passions as a founder. As someone who missed the mark on both early on, I hope this is a chance for you to leverage my learnings to hack your grind and take the express lane to own your life.?

Within your business model, there are two types of grinds that the self-employed will face; the startup and the services grind.?

Startups can be an endless grind of hard work with no return in sight where you depend on family and friend money and if you’re lucky, venture capital funding. High risk but high reward although very few self-employed people make a sustainable living from this as 90% will fail.

Unlike the gamble of a startup grind, in a services business, you provide a familiar service that customers are fully aware of and used to paying money for. There is more certainty in cash flow but you trade time for dollars and sometimes you wonder whether the client and sales headaches justify the profit you make.?

In either case, you may be putting in an insane amount of hours and feel like you need to twist people’s arms to get anything done. When you pitch someone you get your ego stroked but when it comes to signing on the dotted line “something came up.” This means that when someone does give you a shot to be your client but happens to be a complete jerk, you need to suck it up. They own your livelihood and they could ditch you at any moment. You do not own your life, a few business bullies do.

Before you embark on a startup or a services grind, it is extremely important to take the red pill and face a harsh reality check on whether the business model is sustainable before you “grind it out” and learn the hard way. I chose the latter and came out of my 20’s with a school of hard knocks degree in business models pivots. These of course, have their own benefits, but I suggest you pivot a lot faster than I did.

Story #1: A startup grind with a hopeless business model and questionable product-founder fit

“Paul, is your mood-based restaurant discovery app a vitamin or a painkiller for customers?"

"Excuse me?"

"How many times have you forgotten to take your vitamins vs. pain killers when you’re in the middle of a migraine?” Our advisor was challenging whether my Dragons’ Den nominated app was a nice to have or a must-have. I felt extremely irritated but also consumed in deep thought.

“I get your point. I think we’re pretty essential. How can someone settle with going to the same old restaurant or having to message a bunch of friends? Our app takes a fraction of the time for people to be adventurous, why would they not go for this?”

“Paul, we’re meeting at the same coffee shop as usual, are you not contradicting yourself?”

“Errrr…yeah well today just got busy and this one is so close to the office.”

Case in point. People’s busy lives and deeply routed routines make a lot of business ventures in the category of a vitamin that is nice to have but easily forgotten. Intel’s Andy Grove claims that to transform an industry rapidly, an innovation must offer benefits that are 10x, or ten times better, than what existing alternatives can provide. We were maybe 2-3 times better than a basic Google search or asking a friend where to eat but we were far off from a 10x improvement - we needed millions of funding for that.

“Paul, let's say we pumped millions of dollars into improving and marketing your app - does the business model make sense?”

“Sure, we’ll get lots of downloads and it’ll be an easy sell to restaurant clients.”?

“Paul, let's dig into some basic numbers before you make those assumptions. 73 percent of an app user's time is spent in their top three apps so unless you are Instagram, Whatsapp, and Google Maps your app may never be used and restaurants will catch on. In fact, 72 hours after installation, 77 percent of users never use an app again.”

“I guess we’ll need to prove the critics wrong.”

“Sure Paul, let's say you do. How will you acquire more restaurant partners sustainably given their terrible marketing budgets? You were telling me you charge $100/month and it takes you about three meetings to close them. They usually leave after three months so their lifetime value is $300 while you have spent a few hours selling and onboarding them - you barely break even in labour costs.”

“You’re right, we need to work on that.”

“One last thing Paul. If your gifts as a founder are to sell, hire people, and consult clients, how are you enjoying digging into app bugs and trying to manage introverted software developers? Is this product really a fit with you as a person?”

This one really hit home. He was right, I hated waiting months for what I thought was an easy feature to ship - my developers ferociously reminded me that I had no idea what I was talking about. It was hard to sell a half-baked app and I could never really strategize with the client because the app was supposed to do all of that. I felt boxed in from what I like to do and there was no joy I got from analyzing user logins and engagement metrics. You can only pretend for so long. If I was hellbent on helping people find better restaurants in their lives then I likely would have moved to Silicon Valley and eaten ramen for years after. I really didn’t care that much about solving this problem in the end and it only became clear when we were facing extinction.

Months before our bank account ran dry, we swallowed our pride of being poised to be tech billionaires through an infinitely scalable app and opted in for a more stable marketing agency approach. Here the cash flow would be higher per customer and we wouldn’t have to build our own online community, we could leverage Instagram's. This brought in a different level of challenges I also had not thought through in this desperate pivot.?

Story #2: A services grind with a limited business model but better product-founder fit

The complete opposite approach from a startup grind is simply innovating within an established legacy industry. At one extreme of the services grind business model are consultants and business coaches which may still be seen as vitamins by clients who believe they can do it themselves. On the safer extreme, there are professional services advisors that tailor to everyone's painkiller needs to one day buy a home, lease a car, invest for retirement, and organize their taxes. Realtors or mortgage brokers may not be as catchy as a “Growth Hacker” consultant but they are a closer shot to being a painkiller when someone gets kicked out by their landlord again and has a growing family to take care of. However, you have a lot more competition and you're usually selling the same commodity products.

Today. we're lucky to have cracked success in both service grinds but it started the hard way when we pivoted away from our app. Back to the story.?

“Wow, we’re making over $20,000 a month” I exclaimed as I looked over our metrics.?

“Nice job Paul. It’s funny how it can be just as hard to get $1000 dollars out of someone as $100 eh?” My advisor was happy to see I was learning that a highly-involved sale should warrant much higher margins.

“You’re totally right. However, it feels like whenever we’re about to pass the $20,000 ceiling, we lose a couple of customers and we’re scrambling to replace them. Then once those customers close and we’re back at $20,000, another two customers say they’re ready to move on. Plus we need to handhold them a lot throughout the process and constantly keep educating them on marketing basics - I’m not even sure how much profit we’re making when you add up the hours needed to service them.”

“Yes Paul, there are limits in this business model as well. It’s still exhausting to find and service new customers sustainably so you need to charge more to increase profit per customer. You also need to understand how much your client will depend on you after your 90-day trial because there is a lot of upfront work you need to spread across more months of profit.???

“Well, social media marketing return on investment is hard to show with a brick and mortar shop so they just need to trust the process and know that their brand is monumental for their reputation.”

“That’s true Paul, however, because you cannot always show a hard return, they’re going to replace you with a marketing intern who seems to do as good of a job as you. You’re now two artists arguing over who makes better art. The one with the money usually buys his art piece.”

He was right yet again. We were in a futile grind.

Our return on investment needed to be irrefutable to keep them around and it had to be so good that customers were doing the sales for us with referrals.

We were nudged towards building Amazon and Google PPC agencies as they can attribute sales almost perfectly especially if their customers' product is sold online and extremely traceable. That was a whole new career and perhaps a worthwhile grind from a business model perspective although how much did I as a founder enjoy creating marketing funnels and A/B testing creative assets? I thought it was cool but I always delegated that to a teammate. I was more interested in business development and sales strategies.?

I was always meeting marketing partners to step in to execute the campaigns until one of them told me something that changed the trajectory of how I delivered value for clients. It was Justin Hartzman from CoinSmart Financial who simply said: “Paul, you seem really passionate about selling and you seem to be really good at it. Why don’t you offer that as a service instead of the indirect selling your marketing services provide? It’s still going to be a grind but at least it’ll be worth it financially and you’ll enjoy what you do - it won’t even feel like work.”?

Bingo.?

Work on a business model that helps others see a direct monetary gain and makes you feel like you’re not even working.?

This has a similar set of challenges as a marketing agency but what's different is that we have the energy to power through and experiment. Clients can also sense our conviction on why they need our sales playbook and everything starts to seem a little less like a grind as we flow through it.

The Bottom Line

Being self-employed is hard but you don’t need to make it harder than it needs to be by asking yourself these key questions.

1. If you decide to do the startup grind, do you have a fighting chance of being part of the 10% that don’t close down? Optimize for the right 10x differentiation, consumer behaviour trends and profit model math in your favour.
2. If you choose the services grind, can you gain customers significantly faster than the rate you lose them at (applies for startups too)? Is it easy to justify your return on investment or are you in an artist fencing match?
3. For either the startup or service grind, you need to drive down your cost of customer acquisition; $300 in lifetime value clients who take five hours to sell and service means you’re getting paid an effective $60 an hour not counting overhead costs.?
4. Even if all of the above work for you, are you going to enjoy it enough to stick with it for as long as you need to succeed? Your product-founder fit needs to be there.

This all comes back to owning your relative income which could be close to or below minimum wage if you're not careful.

Every grind gives you invaluable learnings of what lights you up and you build skills you never had before - that in itself can be worthwhile. However, the opportunity cost of stress and lost earnings is real and you need to be very careful about what grind you choose.

The futile grind goes against business model gravity. That is rarely worthwhile.