Startup Therapy Podcast

Episode #4


Ryan Rutan: in an age where Apple's market cap hit a trillion dollars and where relatively young startups have a billion dollar evaluation during ludicrous funding rounds. What does it take to hit a home run with your business? Where's the bar set? Does $100 million get you? There? Would 20 million pass muster Is a $10 million dollar business significant. Certainly a $1 million dollar business must be a failure right wrong. On today's episode of the startup therapy podcast, we're going to talk about white isn't always all about the benjamins, but more about how the business achieves the goals of the founder that makes it a win or not. Here we go, Hey Ryan Rutan from startups dot com Back for another session on the startup therapy podcast. I'm here with my partner Wil Schroder who's seen the life changing impacts at various levels of financial success across nine companies in 25 years, including an agency that eventually scaled to multi billion dollar revenue And driving startups.com, million dollars valuation in six years. Well, before we help our friends recalibrate what startup success means, Let's talk about how you got to pondering this question in the first place.

Wil Schroter: Yeah, I mean, it's funny because I saw A lot of founders who were super engaged in their business and they had $1 million dollar business and they were, they were killing it. But then all of a sudden, particularly around the time I started to raise capital for my first business. This is over 10 years ago in talking to a lot of investors and VCS I all of a sudden heard a very different narrative whereby the investors in the VCS said something that really just ground on me so much. They said, Oh, that's a lifestyle business. And it was this really eerie way to take a successful potential business and say, oh, that's not important, that's not a big Waipio laden outcome type business. And so, you know, that's cute, but not interesting.

Ryan Rutan: Yeah, that's not going to build my lifestyle

Wil Schroter: and build your life. There's, there's some important caveats in what they were saying, they weren't saying it's not an important business to you, they're saying it's not important business to me, right? They were saying as an investor, I can't make money off you go, your business isn't important, it's not significant. It's just what they called a lifestyle business, which I have to point this out, the fact that a VC who's own company tends to make one's of millions of dollars per year calling somebody else's business lifestyle business because it makes a few million dollars a year, just blew blew my mind. But whatever

Ryan Rutan: hypocrisy is one of my favorite flavors of ice cream.

Wil Schroter: Right? All of a sudden I started to really put my ear to the ground among founders. And this is again about 10 years ago and I started to kind of notice this narrative where founders would talk about new ideas that they had and all of a sudden, I heard other founders say, oh well, yeah, that's probably just gonna be a lifestyle business myself, wait a minute. This business that's going to make a few million dollars isn't important? All of a sudden, I was like, I know an awful lot of people who only make a few million dollars in their business and their living amazingly well, right. Incidentally, I also know a lot of people who have raised a ton of money and I have nothing to show for. It totally broke. And so I really started to rage against the machine on this one. You know, I really started to get frustrated That this narrative was starting to become more and more pervasive that $1 million dollar business is more of a bunt and not a home run. So I put this article together because I really wanted to start to unpack that a bit because it's a bullshit argument, right? And I think it's dangerous for founders to start to go down this path.

Ryan Rutan: It's one more chance for people to use the wrong measuring stick to evaluate their own success and there's no shortage of these things that exist out there, including other founders stories and using, you know, these massive publicly traded companies as the measuring stick for your own success. Um, and I think this is another dangerous one, particularly when it starts to get involved at the idea stage. You know, if you're talking about founders having discussions about ideas, you know, whether this thing is a lifestyle business or a billion dollar exit, pretty hard to tell at that point in most cases, Oh wait, hang on, Did any of those folks bring a crystal ball with them?

Wil Schroter: Right, right. It, I think it's, it's, it's at a point now where to your point, people are writing off businesses before they've even had a chance to flourish or Which I think is much worse making this notion that if the business, you know, can't become millions of dollars, if it's only $1 million okay. I'm like, I don't know, you know, there's, there's a concept that $1 million to whom?

Ryan Rutan: Yeah, I mean, I'm sure there are people who are going to say that right? And well, you know, a million dollars just really isn't that much by the time you back out expenses and whatever, blah, blah, blah, like 25% left. Yeah. You got a quarter million dollars worth of income. Exactly. And most people that works out okay. I

Wil Schroter: really, I want to stick on that point. If you would just for just a second and we're in no position to tell people what a lot of money is to them, right? And that your mileage may vary in your decisions on your own, it's all relative, let's just use some stats, right. If you could put together a million dollar business that could yield, say a 25% margin. You're talking about about $250,000 a year worth of income now you may have to split that, but it's just for easy math, assume you didn't and that's all your income In most states, that will put you in the top 5% of income earners, right? I've dropped

Ryan Rutan: California and New York from that and you're probably the top 1%.

Wil Schroter: It's it's insane, right? Actually did look up the numbers so that so this isn't me just guessing, but play that out for a second To put yourself in the top 5%. Think of how many other career paths you'd have to go down in the sh it you'd have to endure to get to the top 5%.

Ryan Rutan: Right, well let's see, I could be a doctor

Wil Schroter: twice. Exactly. Yeah. I mean, there's so many other paths that are so much harder to get to that income level and and and I have to point this out because we spend so much time in technology, which is which is often a young person's game, If you can get to that level before you're 30, how is that not an absolute home run and play that out because I I think we lose calibration inside of this Ryan, I think The moment we we forget how much money, $250,000 is we start to lose our ship a little bit. You know what I mean?

Ryan Rutan: Totally agree. Let's talk about it. Let's talk about what does that buy you, right? What, what would that afford you? Um The thing that you talk about in the, in the article is the value of independence. And you know, at what level of income do you achieve some independence? And I would argue that it's not just about the income that delivers that independence to, It's also about working on something that you enjoy with people that you enjoy. Let's stay focused on on on the money for a minute, since that's where we're at. And so let's talk about the value of independence and where that comes from within the financial realm of startups.

Wil Schroter: Yeah. And so we've got, we've got two layers of independence, right? We've got our personal independence whereby we're making enough money to do the things that we want to do, and then we've got our business independence whereby we can wake up in the morning and say, I'm just gonna work on what I want to work on to the extent that I can write, we all have our own parameters and restrictions for this. The latter there for the side of the business that's really about making your own decisions and waking up in the morning and doing what you want to do. For example, if you say, hey, I think the whole company should take the day off today or work from home today, you can do that. That is so powerful, We see that all the time in our own business and the decisions we get to make. I've got to imagine like for you, right? Like that's a huge issue, right?

Ryan Rutan: It is of course it is, you know, and, and it's something that I think over time, you realize exactly how important that is and it's something that I do try to impart to young startups are first time founders that I talked to. There's a lot of them are saying, yeah, but I just, I just can't see how I'm going to get to more than $50,000 in this first year. And then I'll ask him, how much are you making now, Like, well, you know, it's a 45 after taxes. Okay. So like in addition to the fact that you're going to have this independence around decision making and how you spend your time and working on something you truly care about, you're gonna make the same amount of money to me. Like that's your clearing the fence. You may not have seen the moon yet, but you're clearing the fence and I think that there's so much value in that and, and it's often, and I'm sure you've seen the same thing well, but when you talk to founders where they hit these points and what may seem like relatively insignificant milestones, particularly around finance really unlock something for them as they cross these little micro milestones that become the energy and power that helped to propel them to higher levels and again, we're saying like once you get to a million, you're, you're already done a hell of a lot at that point. But it even starts well before that, right, replacing your own income. How many founders do we talk to her just like, should I quit my job yet? Alright. That may seem like that kind of thing where like it's this huge trade off because it is right at the point where you have now built something significant enough to replace your own income. That's a big damn deal.

Wil Schroter: Absolutely. And you control that outcome, right? Exactly fired, right? Not a small thing, right,

Ryan Rutan: firing myself on more than one occasion. Never, never followed through on it.

Wil Schroter: But but but I mean if we play that out, if we think about all of the things that independence buys you, ironically, it's a lot of the things that you want money to buy you, right, you want to be able to wake up in the morning and own your day. You want to be able to wake up in the morning and say, this is the culture that I want to walk into, right? This is the kind of company that I want to, I want to run or be a part of or have the integrity behind, right? You're no longer subject to somebody else's whims and I think that's invaluable, anybody that's ever had a boss can appreciate how valuable that is. And so if we look at, you know that that first milestone in the business saying making $1 million, $2 million, whatever as the only value to that Is the financial value, say that $250,000 a year or whatever it may be. I think that's wildly oversimplifying the value that you're getting when you get to a self sustaining business. And I think your independence in some cases might be worth more than the actual cash.

Ryan Rutan: Oh, I think it is. I mean, at the end of the day, the cash is just a placeholder for value that you want to exchange somewhere else, right? It doesn't have any inherent value. It's what I can trade this money for what it buys me in terms of time or access or, or whatever else you want to trade it for. And so I think you make a great point there in that it isn't just about the money. The other thing that I think is really interesting about it is if you were to look at, you know, just hold the earnings steady and say like, you know, you're 250,000 and a corporate job versus 250,000 as a founder, you aren't able to buy yourself as much freedom because you you only can trade your cash for those things at that point, your time is somebody else's, you're the culture of the company is somebody else's. So all those intangibles that you talked about at the same level of income aren't possible, which is a great way of saying and proving it isn't the money that gets you those things.

Wil Schroter: Absolutely. And you know what, for a lot of people, it's not like starting a company buys you tons of extra time. So, you know, I won't pretend for a second that it's the path of least resistance as far as trying to free up more time in your life. But it does give you a little bit of a choice on how to spend your time. For example, you know, we put in a program a long time ago at startups dot com where we allowed everybody to work at home on Wednesdays, right? So every Wednesday of every month, the whole company works from home. And you know, what happens is all of a sudden people start to see their kids again, They're still working, right, they're still doing their stuff, but you know, they they get to see their kids uh you know, leave in the morning and come home at night or they get to see their spouse, so they get to see their friends, you know, heaven forbid they get to have a beer for lunch, you know, and and and not think much about it, right? Like all of a sudden I think when you get your independence, when you can free things up, you can mold the world to be what you want it to be. And if you were to take that away from someone and say, I'll pay you more, but you have to go back to a world where none of these things exist anymore. Any entrepreneur worth their salt would say, fuck you, right, That's there's no way

Ryan Rutan: I'm not the trade that I want, right? These are not the things that I value, especially if I don't have time to spend it, what am I gonna do with it? Right? And yeah, again, like when you spend your time doing something that you really enjoy, you don't consider that a trade for the money,

Wil Schroter: right? Right? And, and, and look, sometimes people get paid extraordinarily well to do the stuff they hate and they kind of make a life out of it altogether. In all fairness among startups, we often do what we love and get paid peanuts if, if nothing, then going in debt for it. And we still sort of want to do it, we kind of wish we got paid for while we're doing it, but we're still into it. I think that for for most founders getting into this game, while the money is important, you know, to be able to get to that million dollars or whatever that milestone is building your own thing is what's more important. And again, when we kind of map back to this narrative that it's not big, it's a lifestyle business, ergo it's not important. I'm like, I don't know about that, right? I don't I don't think you're looking at the whole picture, because if you're going to tell me, I could make the same, maybe a little bit more working at a job where I have no control in the future is told by someone else. I just don't see how any founder would find that to be a step up and therefore that's a huge part of the real value.

Ryan Rutan: Yeah, it's it's a huge part of the reason they became founders in the first place, they said, hey, I could go do this, How many times you hear the story? It's like, well I was doing this thing in a company and I realized not only there is there a better way to do it, but I could be doing it for myself and making the same amount of money and not putting up with Jeff or whatever, Jeff's name is the company that they work at, right? There's always some version of him and it's a very common origin story for companies, and they say, like, you know, look at the benefits weren't as good in the beginning, I made a little less money, but damn did I enjoy what I was doing, and I never thought of it as work, right? You know, I at the beginning of a startup, we all subscribe to that, it's sort of the opposite of that book that tim Ferriss wrote, it's the four hour work, our right, which is that you're cramming in as much as you can into every bit of it, and you tend not to notice.

Wil Schroter: Yeah. And and so what's interesting about the milestone, right, if we're talking like, you know, the million dollar milestone example versus this has to be a big business, it's not a billion dollar business. The

Ryan Rutan: funny thing about that, right? Every billion dollar business Was $1 million dollar business at some point,

Wil Schroter: they all passed that milestone, right? The problem is in the formative stages, and I'm sure a lot of the folks listening to this are there right now, they start to think about, well again, is this business can be big enough? Do I need to raise money, etcetera? They're constantly taking everything through this filter of, it has to be bigger. It has to be giant, does it? Or said differently, Does it have to be giant? Right out of the gates, Can it start off as a small business? Operate as a small business for a while and then when the time is right, maybe ramp up right? I I don't subscribe to this all or nothing mentality that if you if you don't make it a giant business immediately, it's insignificant in some way, I just haven't met many founders who have built a business making a million dollars, $2 million etcetera, a profitable one, of course and are saying to themselves, this is horrible, I really want out of this, I just, I just don't, and and I think the narrative is broken in that capacity, that that the the top line definitively tells you whether a business or the entrepreneur for that matter has value

Ryan Rutan: in the same way that you talked about the the income being relative, right? And it's it's about the decisions that you make, it's about what you do with it. The scale of the business is the same way success is relative really to how you feel about and again, back to what are the objectives of the founder, right? If your objective is only to make a billion dollars first, I'd say like it's kind of a weird objective.

Wil Schroter: Yeah, it is, you

Ryan Rutan: know how you're gonna spend it. Um actually

Wil Schroter: rents, stick, stick with that for a second if you will, um if you will, and and the the million dollars, do you know how you're going to spend it, etcetera because I think folks that are especially early in their career Don't have a good calibration for how much $1 million dollars really is.

Ryan Rutan: It's absolutely true. We remember you and I sitting with a group of, I believe it was one of our intern classes and so we're talking about, you know, kids who are anywhere between probably 19 and 22 23 still in university, most of them and we were talking about this and about the fact that, you know, you know, if you can do something within your company that puts $250,000 in your bank account, how impactful that is, How many things that changes for you. The idea that life changing money is somewhere like million dollars, $10 million, $100 million. The reality is life changes every time you get more money than you have now.

Wil Schroter: Yes, significantly, and I think there's, it's worth mentioning that there's a few fairly important milestones that people hit for example, and your mileage may vary in different parts of the country of the world, so bear with me on us dollars, etcetera. But the 1st $250,000 you make, in other words, if you were to work at a company and somehow get a $250,000 check, I would argue would be the most important money you'll have ever made in your entire life, right? Because most of our life is spent initially making shitty money in our twenties and mostly into our thirties. We start to make some decent money into our thirties, into our forties and then start to actually have some savings because we haven't been doing nothing but spending in our fifties and beyond with that said, If you had $250,000 dropped into your account right now when you're 27 years old, You've probably just dropped in the equivalent of 10-15 years of net savings. People don't think about that, I'll make a lot more money later. Oh yeah, you'll make a lot more money

Ryan Rutan: saving your vast majority of, of the population. Unfortunately the savings rate is, is peanuts. What you're really talking about is I think we're at like 2 1/2 to 3% savings rate, meaning that it would be a hell of a lot more than that for most people on income. So yeah, you're absolutely right.

Wil Schroter: Well people don't understand that and I'll use myself as an example when I was young when I was 22, I made my first bit of cash and in that year I remember I bought a house, a couple of cars, all my furniture, et cetera. And this amazing thing happened, I was I was totally broken my life before that. So I didn't have any concept for money, but I remember being in my house and I was looking at my little spreadsheet or whatever. The other things that I still needed to buy. And the crazy thing, it wasn't that much, right? Like, like house check, right? Uh living room, furniture, check, car check, and I was like, well ship now that I've got all those things, where else would I be spending my money. And I realized in against a very young age at 22. But I realized that at that moment that all of the income that I would make next year would all of a sudden become net income because otherwise it would have all been eaten up by all of these purchases. The down payment on a car, down payment on a house furniture for the house curtains or what the hell ever? Right. Like It was all going to get eaten up over the next 15 years of my career on every dollar of my income and I haven't even factored in kids or you know, or buying a bigger house for kids etcetera. And I realized that that 1st 250 K that I spent was by far the most impactful money I'd ever made, especially if you get it at a young age in, in, in in a very quick timeline,

Ryan Rutan: Let's also not take it as a foregone conclusion that it's just really easy to get to the million dollar mark or the $250,000 mark. Right? So, so let's talk about like how do we get there and how do we get there as fast as we can given that this is a really important milestone. How do we get there?

Wil Schroter: Well, it's important to say like how we get there and one of the milestones to get there, but also, you know, what could prevent us from getting there. Right? So for example, if all we're thinking is this has to be a billion dollars in every single decision we make from how we raise capital to how we staff up to how we scale is only based on this one outcome. Well then we're specifically limiting the probability that that we're going to get to even the first on the first base, essentially. Right.

Ryan Rutan: I just pictured a really late model car with like the hubcaps half off and the paint faded with a bumper sticker that said billion dollar or bust.

Wil Schroter: I'm

Ryan Rutan: actually, because when you start to make decisions that just point you in a particular direction without any flexibility, without any thought for the short term, you're likely to getting there so much less. Yeah. Well yeah, look out for that car.

Wil Schroter: When you start calibrating too improbable outcomes, you have to be okay with the fact that you're reducing your chances of success. For example, In the us there's about six million businesses per year that gets started and in look that that number is wildly inflated. You just want to be clear like some of those are just people filing LLcs. However, what number isn't inflated is that there's about 100 and 60 I. P. O. S per year and that's even in good times right now, right? If what you're trying to calibrate toward is that level of success, that kind of outcome. That is such a freakishly small percent. That that you're trying to calibrate for that. You're really saying to yourself, I'm willing to forgo all of the potential wins in between because I only have to have the home run, which is cool. Home runs are fun, right? However, you're also saying I have to hit this huge milestone, thereby the easier to achieve milestone is no longer on the table. For example, when you raise money and let's say you and I raised $10 million Ryan, we can't just finish this off as a million dollar business throwing off $250,000 a year. Like we'll never see that money. We're forever indebted to the people that that we raised from. Once you go down that path, which there's a time and a place for once you go down that path of raising money, you definitely change the potential outcome.

Ryan Rutan: Yeah. And the achieve ability. Right? And then and then not just that, but the achievement of all the past milestones may matter a lot less at that point. Yeah, absolutely,

Wil Schroter: Absolute. And so, you know, in in in the early 90s I had started an ad agency that was one of the first interactive agencies. And early on I just wanted to make $100. I had no big ambitions. My ambitions were very, very, very small, if I

Ryan Rutan: if I'm not mistaken. Um and I know I did something very, very similar with the cafe that we traded off for. But didn't you get paid in ribs at one point.

Wil Schroter: I literally did a website once uh for for Damon's in Columbus, Ohio uh and they couldn't afford it. And so I traded them for $500 meal of ribs. And let me tell you those are the most delicious ribs ever. I thought I was being overpaid at the time. So so you nailed it. My ambitions were extraordinarily low. But get this that was actually the most useful to me because every single time we had another client when every single time we had another engagement that that just did anything to move us up into the right, I was so excited. Now now imagine for a second that that wasn't my my thought process right? Imagine for a second my thought process was like, Dude, I don't care about it. Like another $10 if it's not another million dollars, I'm not interested Right now in all fairness like that business. I mean it's changed hands so many times by now, but it's like a $4 billion dollar company now, right? But but It started $1 at a time. It started

Ryan Rutan: by

Wil Schroter: you bet you bet man. Like all those, all those tiny milestones and what we did is we calibrated our expectations for what the business could be or what we deserve to get out of it. One milestone at a time, you know, we didn't just say has to be billions of dollars. And frankly we couldn't have, there's there's no version where you go from selling ribs one day to day business is worth billions of dollars and you've got nobody. And so what we found was really important was setting milestones that were very, very achievable getting past them going on to the next one, right? So for example, Even when we started startups.com, right? You and I, we sat down in our pro form of income statement, we're doing our projections was saying, let's make $10,000 of income this month. Yes, we wanted to build a bigger company, but we're really good at calibrating our expectations so that we can take one step at a time versus just saying, well, if it's not worth $100 million we're not going to bother. It's like, that's great.

Ryan Rutan: Feel good about it along the way, right? Didn't have to feel like we were falling short because we were setting achievable milestones, we were hitting them. We were using that as more ether in the carburetor to fire us up and keep us going and hit the next one,

Wil Schroter: right? And what we kept saying, and I think this is valuable to a lot of founders is, look, if we can get, we can go from 10,000 month in revenue to 20,000 month in revenue, then maybe we can get to 30 or 40 but let's focus on getting there first and see what we learn right? At no point did we think, well, if this only turns out to be a million dollar business, We're not interested. We just said look if it's, if we get to $1 million, great then let's figure out where to grow it from there. I think there's this doesn't have to stop there, right? Yeah, that's

Ryan Rutan: A million dollar business and yeah. Yeah Okay. It used to be $100 business so we can continue to change.

Wil Schroter: I never quite understood this this concept where hey, that doesn't sound like a big business, thereby, it can never be a bigger business, right? I mean there's there's no version with with say startups dot com. Whereas we're building it, we can't say, well what if we extend the product or what if we had a larger reach in our in our sales efforts? You know, global

Ryan Rutan: system, How it always happens, right? Like it's you start a hamburger joint and you're like well This thing can't make more than $150,000. business can't take any further than that. What if you had to ship?

Wil Schroter: Yeah, that's that's that's a good point. You know,

Ryan Rutan: like there's all businesses go through these things that you're going to hit certain types of plateaus. Um You're gonna hit certain thresholds where things may change in your tactics for getting to that next level may after you change like to your point at some level we may tap out a U. S. Market and say like okay how do we attack latin America not literally attack it. How do we, how do we start to become viable as a business in latin America. Let me rephrase that for all my latin american friends were not coming to attack. But so I think that's that's the crux of it, right at some point. That's going to happen at many points. That's going to happen in your business. And so it's not a matter of like, well, it either stops here, um, and stays $1 million dollar business or, or nothing else happens. There are plenty of ways to change that outcome.

Wil Schroter: Well, in two facets of that one is, look, when, When we're planning the business, we literally can't plan whether it's going to be more than $1 million dollar business, we can predict. We can torture our spreadsheets. We can do all the things that we want to do to convince ourselves that it's a bigger opportunity. But as any venture funded portfolio will tell you most of them aren't, aren't that bigger opportunity? They're funded

Ryan Rutan: correct.

Wil Schroter: Right? Statistically you're you're probably going to be wrong. But the second part of that is even if you are sort of right, that that doesn't consign your fate right? It doesn't mean that the moment that you've determined in your pro former that it's only a million dollar business that you just throw your hands up and everybody goes home, right? CFO said it's a million dollar business? I guess we're all done here. That's absurd right? I can take almost any business model as the CFO myself and show you a pro former that makes it, you know, 100 million or a billion dollar company, right? It's, it's absurd. But almost anybody can do it. That doesn't make it 100 million or a billion dollar company. Right. More importantly, you don't really know Whether that path, that bigger path is even available to you until you actually get to $1 million dollar company. You have to prove it out first before you just determine its fate. And I pisces me off when I see particularly investors, uh, do this where they just write businesses off immediately. Now, part of their job is to do that. So in all fairness, uh, I'm not saying for a second that they shouldn't go through that thought process. I'm saying when they tell the founder definitively as if it's this, this oracle of knowledge, your business won't be any bigger or won't be successful. That's just bullshit.

Ryan Rutan: Yeah. And, and it wouldn't even really be a problem if they did that. If the founders didn't take it to heart most of the time that, well, you know, I had this idea, but, you know, I I sat down with, you know, my, my uncle's attorney who, you know, he does a bunch of startup investing, right? He owns three laundromats. And, you know, he told me this, this isn't going to be more than a lifestyle business back to that disgusting term, aren't all businesses, lifestyle businesses, isn't that why we're doing?

Wil Schroter: Hopefully I've seen plenty of, uh, founders with million dollar lifestyle businesses and they have some pretty freaking amazing lifestyles. Like I just, uh, I scratched my head and I again, I really bothers me when people start to kind of look at things in such a, a narrow focus. What this comes down to the practical outcome for founders is this cost of mis calibration as I would call it, right? This cost that if you're thinking this has to be bigger, no matter what, and you don't have a reason why that you have to make that much more money or you don't have a reason why the business actually does have to be any bigger. All of a sudden you're making a bunch of assumptions in major decisions based on some pretty flawed logic.

Ryan Rutan: Yeah, for sure. Because you don't really have any concept of of why it needs to be that way right? It's sort of arbitrary, you're saying, well, you know, this needs to be, you know, if it tends to map back to the, well, if we get this percentage of the market and if we sell it right, and you end up with these really arbitrary round large numbers, they don't actually attached to any specific outcome that the founders trying to achieve, and it's super dangerous. That becomes your North star, you'll chase it everywhere without having any idea as to whether you're going the right direction or not.

Wil Schroter: Yeah, if your answer is I have to make 100 million on an exit or a billion dollars in extra or whatever your big number is. But you can't then answer the question of what specifically are you going to do with that money when you get it and why is that the minimum amount of money you need in order to achieve whatever those goals are, then you're miss calibrated,

Ryan Rutan: right? If you're saying unless you owe the Sicilian mafia,

Wil Schroter: Exactly. No dude, it's got to be 100 million or this shift ends very specific outcome. No, but look, look if you're saying, hey, it's gonna be $100 million exit, I need to take at least 30 million off the table after investor dollars and whatever else do you, Have you ever made $30 million? Have you ever run a spreadsheet to find out exactly how far that money takes you? Um, listen, maybe you didn't write or maybe maybe you made the argument that hey, I need at least $1 million dollars because with investments and interests, I don't want to work for the rest of my life. Really?

Ryan Rutan: Dude, you're 27 years old never works out either like that. That that lasts about six weeks and like somebody give me a job.

Wil Schroter: Yeah, yeah, congratulations on being the most bored miserable person in the world right? Like and, and so people don't think through these things. So, so they create this mis calibrated goal where they're saying it has to be this amount um in no less. Well listen, the moment you say and no less. The moment you say, it has to be at least this threshold, you start taking out a lot of other options that might have been the more likely and maybe better outcome for what your business is going to be

Ryan Rutan: To your point. The we both know a lot of people who are at like this kind of million, let's say a million to $5 million things our causal, I'm just saying that it isn't a foregone conclusion that if I'm happy at this level of the business, if I double it triple it 10 exit, I'll be 10 X happier. In fact, quite often we see the opposite sadly.

Wil Schroter: Yeah. And what I want people to look at and and you and I talked about this a lot is what is the fastest most achievable path and what idea that might that be part of that can get me to my minimum goals, right? So for example, what is the fastest path to get me to $8000 a month of net income, which is a lot of money Again, you know, I live in Los Angeles and I can still say that's a lot of money, it doesn't go as far here, but I'm just telling you in general, um that's a lot of money, right, Especially if you don't have it. And so, so what is the minimum amount of effort, timeline, etcetera that I need to exert in order to get to that milestone? Now, once I'm there, You know, my visions can get bigger. I can say, well how do I get to to 20,000 a month, etc. But what I love to see in a scrappy entrepreneurs plan Is right now the most important thing in the world to me is getting to $10,000 a month. I can show you a pro former that gets me to $100 million doesn't matter right right now, I just want to get to this critical milestone and when I start really dialing in those milestones and I start to say, look man, if we can get this business to $40,000 a month, gross, we can take $17,000 a month net and take home pay. That will be life changing for us. We're buying houses at this at this point, we're having all the independence in the world, we're doing all the things you've ever wanted to do. That's a smart plan

Ryan Rutan: And look at the end of the day, what we're really talking about is building something of value. The size of the value is a bitter relevant, particularly the early stage. Again that value can grow over time, but the core of it is we want to build something of value and let's just stick with that million dollar concept at $1 million. What does that allow us to achieve? Can we hit those critical goals? Can we find that path to get there? And is that a home run based on that outcome relative to those goals?

Wil Schroter: Yeah. And and look if if your goals are different, if your mileage is different, if you're saying look I have done the math and I need exactly $30 million dollars and that's a very specific goal. You wouldn't be willing to live with anything less, then that's your number, right? And then you should build and make every decision based on that. What I don't want to hear entrepreneurs say or do is some external source. Typically an investor, maybe the media says a million dollar business for my $5 million business isn't going to be big enough. And therefore somehow my personal goals aren't relatable here, right? Look man, if your if your personal goal is to make $20,000 a month, There's much faster ways to make $20,000 a month. Been raising $100 million in capital for an I. P. O. That's maybe the dumbest way to get to your goal. So what I would suggest here is let's start with what your goals are, most of them are far more modest than people realize when they're forced to actually write them out. Then let's look what's the shortest, fastest most achievable way to get to that goal. And lo and behold if we ever get to that goal. Ryan I know you and I hope everybody does right? And the goal here is to make sure you get there, Then figure out where you want to take the business. If you can get $2 million near-term goals. Then figure out what the bigger goals are because in that case you're already on base

Ryan Rutan: exactly it. You know, I think I said this or something similar earlier in this episode but aim for the moon but clear the fence. And this is something my dad said. I don't know who said it first. I heard it from my dad aim for the moon. Clear the fence right? If you're not sure on what, clearing that fence looks like the likelihood that you're going to trip over it on your way to the moon. Pretty damn high, right? And and I think a lot of people will find that it's really satisfactory to simply clear the fence. As you said, it's still gonna be life changing. And uh I love what you said in the article, which is that the only people who think $1 million dollars isn't a lot of money Are people who don't yet have $1 million. I

Wil Schroter: have seen that firsthand. People say all the time. They're saying, hey boy, well that doesn't sound like a lot of money. It's like, have you made that much money? Like, well no, you know, it doesn't sound like a lot like Put $1 million dollars in anybody's account and it's going to sound like a lot of money and frankly it's going to change their entire lives. So I think it's important for people to come down to earth a little bit at this point. You know, we're talking about creating value. We're talking about finding a milestone that makes sense to you and focusing on the value to you, not everybody else.

Ryan Rutan: Well, that's gonna do it for this episode

Wil Schroter: of the startup therapy

Ryan Rutan: podcast. But in the meantime, if you love what we're doing, head over to Itunes and subscribe and comment. If you want to contact us directly. We're not hard to reach email us at therapy at startups dot com will, and I respond to every email that comes in. Please don't be shy, what we learned today is a tiny fraction of the help that you can get from startups dot com. Whether you need to learn how a startup gets built to find a mentor or raise capital to find new customers. Or if you just need to connect with founders who are dealing with the same ship you are, you'll find it on startups dot com With all that said, let's get back to building our startups. This is Ryan Rutan for my partner, Wil Schroder, and the entire startups dot com community saying goodbye for now friends.

Copyright © 2022 Startups.com LLC. All rights reserved.