Using Your Entrepreneurial Motivations as a Strategic Compass

 

There are countless ways you can approach starting and growing a business.

In the past few months, I’ve talked to a dozen founders who are confused about what they should be prioritizing. Should they focus on being more profitable? Should they grow their customer base or raise prices? Should they raise money? Should they just put things on auto-pilot and let the business coast?

The simple-but-frustrating answer is that it depends.

Sure – there are factors like your customer’s willingness to pay, the size of the market, scalability, and market validation that influence strategy.

However, the single most important factor in what you should focus on (and how you should go about it) is based on your own entrepreneurial motivations as a founder.

For example, if your motivation is to learn a new skill, you may go about things very differently from someone whose motivation is to create a Fortune 500 company within 10 years (with the former you may code your product yourself even if it’s not the best thing for customers, with the latter you almost definitely should be moving fast and positioning yourself to raise a lot of money).

Separating passion from entrepreneurial motivation

Before diving into the categories of entrepreneurial motivations, it’s important to separate passion from entrepreneurial motivation.

Passion is great for helping your narrow down the problems you want to solve or the industry you want to operate in. But there’s a big difference between having passion for an idea and starting a business in it.

Passion alone is not a sustainable fuel for starting a business. When you’re spread thin and times are tough, passion can only do so much to keep you engaged. You need to be personally aligned so that you’re always assured that you’re acting in your own self interests. If you feel that way, it’s easier to keep pushing.

An idea rooted in a passion can be built into a business in many ways.

For example, with my first startup, I was passionate about making an online presence more accessible to small businesses. I could have pursued this passion through starting a small local agency that focused on the needs of small businesses, doing workshops for small business owners, or building a freelance talent marketplace for small businesses (hint: the last one was the winner).

The type of business you build and the way you build it comes down to your entrepreneurial motivation (AKA your personal north star).

The categories of entrepreneurial motivation

Defining your entrepreneurial motivation (AKA your personal north star) will help you determine the type of business you want to build and help guide you in strategic decisions along the way.

Entrepreneurial motivation comes from some combination of the following categories:

  • Learning: no matter what you’re creating, you’re going to learn. Learning can be a great motivation for doing side projects, but shouldn’t be a primary motivator for building a business. Building a business is an extremely expensive, risky way to go about learning. Therefore, if you’re thinking of working full-time on your business, it’s better to think of learning as a by-product than as the primary reason “why”

  • Lifestyle: Creating a business is going to impact your lifestyle, and it may be in positive or negative ways depending on how you go about things. The same idea can be built into a business in a way that gives you more flexibility to spend time with your family, or it can be built in a way that forces you to work 80 hour weeks.

  • Network: with any business, you’re going to meet new people – customers, partners, collaborators, and more. The importance of building your network is (and the type of people you want to be meeting) will impact how you go about it. For example, if your primary goal is to build a name for yourself within a certain community (thus growing your network) and money isn’t a big motivator, then that will have a big impact on how you think about pricing.

  • Finances: A business makes money, right? Usually, there are some financial gains to be made from starting a business. Determining the financial gains you’re striving for will determine the risk profile of your business and how you go about creating it. Do you simply want to make $10K/month? Do you want to make $5M in 5 years? Do you want to make $50M in 10 years? All of these are acceptible desired outcomes, and result in drastically different strategies.

  • Notoriety: building a business can raise your personal profile and legacy.  This is always a factor in starting your own business (and most things we do), and it’s nothing to be ashamed of.

Here are some good personal north stars from entrepreneurs I’ve met:

  1. "I want to be able to say that I built a successful fashion brand and make a name for myself in the fashion community without making large sacrifices to my current lifestyle"

  2. "I want a business that I can hire other people to run so that I can make $200K/year with a little management"

  3. "I want to build a unicorn tech company and be a revered CEO"

  4. "I want to make $3mm in the next 5 years"

  5. "I want to make $5K/m in passive income (<10 hours/month) while growing my network of startups"

These north stars guide decisions and potentially create constraints on how entrepreneurs go about building their businesses. They make sure that the businesses they’re building are serving their own self interests.

The aspiring fashion entrepreneur is ok with things taking a little longer as long as he’s able to maintain his lifestyle. The aspiring $200K/year business owner should focus on building revenue while bootstrapping and slowly building a team to replace her. The aspiring tech unicorn will make many more personal sacrifices, and should be focused on moving quickly and positioning herself to raise a lot of money.

As for the last two, I’ll dive deeper into these real stories to demonstrate how this looks in practice.

"I want to make $3mm in the next 5 years"

A friend of mine started a company a few  years ago, and he was very clear about this being his entrepreneurial motivation. He’d stumbled into an idea that he found really interesting, and he was realistic about why he was starting his own company in this space rather than working for someone else – he wanted to make $3 million dollars in the next 5 years.

This was a lofty goal, but it’s helped him define his strategy for growing his business. With this as his north star, he raised money (but not too much), grew his business in a low-risk way by focusing on repeatable revenue, and kept the company well-positioned for an exit. With employees and investors and dozens of stressors he deals with running a company, he can at least rest assured that he’s acting in his own self-interests. Hitting this north star is still not guaranteed (there’s always risk), but since this has been a common consideration in all of his decisions along the way, he’s tracking towards it really well. 

"I want to make $5K/m in passive income (<10 hours/month) while growing my network of startups"

Spoiler: this is me. I recently formalized the way I’ve been helping some of my freelance friends find work with startups. I’m managing a curated network of really great freelance talent and startups who need freelancers for projects. I’m simply making referrals, and if my freelance friends land the projects, they pay me a referral fee.

Before I started spinning my wheels, I asked myself about my motivations for doing it. I didn’t care much about learning in this situation. It was mostly about making money by being a connector (something I already do and enjoy) while growing my network of founders.

With this as my north star, I can work backwards to figure out how many freelancers I need to be helping find work and the number of gigs they need to be getting from me. Doing this quick math tells me that I don’t need worry too much about growing my network of freelancers or startups. I just needed to formalize a few things and keep doing what I’m doing in order to achieve this goal.

I can do all of this manually, which means I should not spend any time building a product. I also don’t need to think about marketing much at all.

By being super clear on my north star, I’ve been very efficient with my time and will likely achieve it in the next few weeks, and have spent no time spinning my wheels.

Conclusion

There are countless ways to build a business. Be clear on why you want to build a business in the first place and it will make all the smaller decisions along the way easier.

 

 
Mike Wilner