Recently realised an interesting thing I believe I never saw written. And yet, it might be the thing that caps the business development of many beginners.
So, most of us started as employees after school. And I believe in the US it might be a little different but where I am from - as an employee you get totally "white"money on your bank account. Meaning your employer already paid all the taxes and other government payments for you. Every currency unit you get is essentially yours. 100% margin.
When you get into your first solopreneur business, it changes. Now you first get the money and then need to pay the government. Your effective margin drops from 100% to, say, 95%. Or 90%. Or something like that.
Then equipment comes into place. Accountant. Rent. Leasing. Materials. Margin continues to drop further. And then the final boss arrives - employees. Most largest businesses enjoy margins somewhere between 3% of Walmart and 30% of the most lean and effective construction companies.
And that is a scary thing no one teaches entrepreneurs. That there are long stretches of time when your absolute numbers grow but you can use basically the same amount. That you may have the largest sum you`ve ever had and not being able to buy anything.
And I see a lot of people who are stopped in their tracks by this perspective. Who`d rather die doing the job themselves than hire help if it means their margin will drop from 80% to 60%.
In contrast, what I see in successful businessmen is that when asked "What would you do if you had to start all over again?", employees appear in their plans almost instantly, like the first moment they could afford them. Those people know that 25% margin is coming, and they would rather build such a system from the start and expand it than build a "me first" system and then degrade their margins.
I am not trying to promote something here or advocate for solopreneurship vs hiring a team. Just wanted to share this mind nugget, maybe discuss how you all feel about it? And maybe there are books out there that dig deeper into this transition and how it affects our thoughts?
So, most of us started as employees after school. And I believe in the US it might be a little different but where I am from - as an employee you get totally "white"money on your bank account. Meaning your employer already paid all the taxes and other government payments for you. Every currency unit you get is essentially yours. 100% margin.
When you get into your first solopreneur business, it changes. Now you first get the money and then need to pay the government. Your effective margin drops from 100% to, say, 95%. Or 90%. Or something like that.
Then equipment comes into place. Accountant. Rent. Leasing. Materials. Margin continues to drop further. And then the final boss arrives - employees. Most largest businesses enjoy margins somewhere between 3% of Walmart and 30% of the most lean and effective construction companies.
And that is a scary thing no one teaches entrepreneurs. That there are long stretches of time when your absolute numbers grow but you can use basically the same amount. That you may have the largest sum you`ve ever had and not being able to buy anything.
And I see a lot of people who are stopped in their tracks by this perspective. Who`d rather die doing the job themselves than hire help if it means their margin will drop from 80% to 60%.
In contrast, what I see in successful businessmen is that when asked "What would you do if you had to start all over again?", employees appear in their plans almost instantly, like the first moment they could afford them. Those people know that 25% margin is coming, and they would rather build such a system from the start and expand it than build a "me first" system and then degrade their margins.
I am not trying to promote something here or advocate for solopreneurship vs hiring a team. Just wanted to share this mind nugget, maybe discuss how you all feel about it? And maybe there are books out there that dig deeper into this transition and how it affects our thoughts?
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