The Only Calculation that Matters as an Entrepreneur

BUSINESS icon Giles Cadman April 3, 2018

Lately, I’ve noticed a lot of writing coming from entrepreneurs in San Francisco, San Diego, and other startup hubs with advice about the things you need to consider before launching your business.

While this might just be a recent trend, I found a few of these ideas quite disagreeable.

One of the ideas, that caught my attention was something called the “4 a.m. test,” which comes from Reddit co-founder Alexis Ohanlan. The test, put simply, is that if your startup keeps you awake, thinking until 4 a.m., then it’s something worth pursuing.

However, if the business doesn’t keep you up at night, then apparently it isn’t worth delving into.

The sentiment makes sense: only start a business if you’re willing to work hard; however, I don’t necessarily think it’s the proper advice to be giving aspiring entrepreneurs.

I would argue that to be a successful entrepreneur there is one calculation you should be paying attention to, which is: how much can I buy (or create) the company for? The answer leads to the follow-up: how much can I sell the company for? And finally, how much capital can I make from this transaction?

While some will read this and argue it’s “un-entrepreneurial,” this calculation demonstrates the true meaning of being an entrepreneur.

Entrepreneurs are not business owners. They are not good at working in a company, but excel at working on a company, growing it, and eventually selling it for a much larger profit.

A favourite example of mine is that of the coach and the team. The coach, while he may not be the best sportsman, excels at finding the proper talent and motivating the team to play to the best of their ability.

I think this example relates to my approach to business and the way in which I acquire companies. I’m good at running my 30+ companies from a high level, however, everyone knows not to expect me to get involved in the day-to-day, nitty-gritty.

So my advice to you is that if you have a business idea, and you think someday it will be worth something – don’t worry about if you’re staying up till 4 a.m. thinking about it or not.

Now, I’m not saying I don’t work hard, because I do. And you will have to work hard, too, if you decide to start a company. In fact – I work in many different time zones, so my businesses do keep me awake till 4 a.m. many nights, just not for the reasoning Ohanlan suggests.

My point is that the idea of being an entrepreneur and the lifestyle that comes along with it have become exceptionally glamorized. I only want to remind everyone that you can sell your startup, and still be a respected entrepreneur. This is the one of the motivating factors for many entrepreneurs: to grow and sell their business.

The real skill of being an entrepreneur is being able to motivate others to run the business, manage the emotion and day-to-day life, while you focus in on the guidance, mentoring, and turning a profit.

So if your startup doesn’t keep you up till 4 a.m., that doesn’t mean you shouldn’t go for it – it just means it probably isn’t your passion. But if it might make you some money, then it’s probably still worth jumping into.