Start a company, the reason why

redazione / 15 May 2015

This morning I was reading an article on by Eric V. Holtzclaw: “Why’d You Start a company?  3 End Goals”. 

The blogger is the CEO and founder of User Insight, a user experience strategy and consulting firm that advises brands on the development of customer-centric products, services, marketing messages, and experiences.

In the article he recommends “Before you do anything else, figure out why–in the first place–you launched your company. You need to know now what you want to get out of it….. What do you ultimately want the company to do for you?”

There are 3 main end goals and 3 related kind of companies, according to the article:

  • One Man Band: this kind of company is perfect for a person seeking “to start their own job”. It is usually a really small organization where the control is centered on the founder who has a much more flexible lifestyle than he would as an employee. The salary of the founder is often comparable to a good managerial position in a medium to large company, and the larger risks associated with self-employment are compensated by the quality of life associated with being your own boss.
  • M&A Candidates: The owner of this sort of company considers it an investment. The approach is really similar to private equity; you are creating a company to attract a bigger fish to acquire it. Normally the salary is lower than a comparable managerial position, but you expect to get a bigger part of the cake on exit.
  • Cash Factory: the owner of this company is aiming to create a lot of money through widening margins – you have to sell everything you can sell and squeeze all the costs you can. Consultancies and other project-based businesses are good examples of companies that fall into this category, apparently.

Immediately after finishing the article, I had a strong reaction and was tempted to write to the guy to tell him what a selfish person he is and how his perception of life is so limited.  After breakfast I chilled out a bit and realised that it was better to avoid giving free feedback to such a jerk.

What Eric suggests is that there are three reasons to start a business: make money by paying yourself a high salary, make money by selling the company you create, or make money by creating a company that makes money.  Basically, Eric seems to be saying that businesses are about making money.  Wow, what a revelation!  Can you believe this guy is a consultant on the development of customer-centric products, services, marketing messages, and experiences!

Like always, the real problem of this statement is not the answer, but the question.  The first thing you should ask yourself before do anything else, can be inspired by the famous John F. Kennedy quote: “Ask not what your country can do for you – ask what you can do for your country”.  When you’re thinking of starting your own business, one of the first questions you should ask yourself is: “What could I do for my company?”

You need to take a long look in the mirror.  The most important thing is to understand your “motivation”.  What is going to sustain you when everything is going wrong?  When no one seems to understand the potential of your project?  What is going to  push you to succeed after you’ve already drunk an incredibly unhealthy quantity of Red Bull and come really close to having a mental breakdown?

What is the fuel that gives you energy, generosity, passion to succeed?  What motivates you?  What makes you happy, what makes you proud?

My friends, and my dear Eric, here are my 3 alternative motivations and related kinds of companies:

  • To Do What I Enjoy:In this case your startup is based on your passion.  You love food, so you open a restaurant with your own particular style and cuisine.  You love technology, so you plough your passion into hours and hours of code-making for the next iTunes app bestseller.  You spend your time doing what you enjoy, you’re good at it, and you can make money doing it. Whoever manages to be successful in this category is a really lucky guy.
  • Generate Wealth:Money, yes, but with the realization that money is a means to an end, rather than an end in itself.    You can focus on your wealth and what it means for you and your family, but you can also consider the impact you can make in the lives of your employees through the opportunities you create and the working culture of your business.  You can be part of your clients and suppliers success and contribute to the growth of the economy.
  • Give a Sense to My Life and Others Lives:  In this category there is a mix of business and spirituality.  Basically you see in your company a  way to express yourself; to give meaning to the time you spend in this world. You want to impact on the way people behave, to have a big impact in others lives and for this to be part of your own success.  You can change your industry.  You can change business.  You can change the world.

The last category, which was completely absent in Eric’s article, is the category of the visionary. Companies like Google and Apple fall into this category. They make a lot of money, and they have an incredible amount of market pressure on them to increase their profits, but for the founders this is not the goal, this is the consequence of a stronger and more meaningful motivation.

Have I forgotten any other motivations?  Do you think my list is complete?  Can you propose a better pattern?  Thanks in advance for any comments.

Written by Simone Cimminelli (iStarter Equity Partner)