What is the point of starting a business?
You can find a lot of opinions out there. Some say businesses exist only to maximize shareholder value. Others think a business needs to change the world or contribute to a cause. In my opinion, everything I've seen on this topic has missed the mark, because they all act like motivation is static. That's not realistic.
I think there are at least two distinct phases, and your motivation can change a lot from one phase to the next:
Phase 1: Money
In the early days, every company is motivated by the same thing: Money. That doesn't mean every entrepreneur is greedy, it's just an acknowledgment of reality. If your business doesn't make enough money to cover its expenses (including founder living expenses) it will cease to exist. It doesn't matter what else you claim to care about, you have to make money first.
Honestly, I'm not interested in talking about motivation for early-stage companies for exactly that reason. It's just not that interesting when everyone is in the same boat.
But if things go well, at some point you're making enough money. You can pay all your bills, support a comfortable lifestyle for yourself and anyone depending on you, and save a bit of rainy day money so the business won't be too fragile. What then?
Phase 2: Whatever you want
Once you have "enough", things get complicated. Don't get me wrong, it's an amazing place to be, but you can feel a bit lost. The clarity and focus you had in the early days are replaced with uncertainty and FOMO.
Should you try to become a billionaire? Maybe you should minimize the time you spend working so you can devote more time to family, friends, and hobbies. You could try to give your customers the most value possible, or you could focus on treating your employees as well as possible. Then there's the question of your role in the community. Should you donate some of your proceeds to charity, invest in other startups, spend time mentoring students...the options are endless.
I'll examine this question more in a bit, but the key point is that money doesn't have to be your main motivation once you have enough. The fact that so many businesses default to the "maximize shareholder value" mindset demonstrates both a significant structural problem with our culture, and a profound lack of creativity from entrepreneurs.
Maslow's hierarchy of needs
They say that money can't buy happiness. I think it depends. If you're talking to someone who can't afford food or shelter, you'd have a hard time convincing them that having more money wouldn't make them any happier. But sure, Jeff Bezos probably wouldn't be any happier if you gave him some money.
Maslow's hierarchy of needs is the idea that as your circumstances change, your needs change. At the bottom of the pyramid, you have things like food and water, and then as you move up the pyramid, the needs become more obscure and emotional. I'd argue that if you don't have the first two tiers of needs met, money absolutely can buy happiness. But as you satisfy your basic needs, it becomes harder and harder for money to contribute.
This is the exact same concept I was describing above. A new business starts in the "physiological needs" tier. Until you're profitable, your basic survival is at risk. Then you become profitable, but you still don't really have enough financial buffer to sleep easy. That's the "safety needs" tier. Once you have that buffer, you move into the top three levels of needs, and that's when money stops being the most important thing.
An important thing to notice is that achieving your monetary goals doesn't mean you're done. You still have needs, they just aren't achieved by making more money.
It's hard to say what's right, but it's easy to say what's wrong
I hate to say this, but in my opinion, anyone who is primarily motivated by money after they have enough is a broken person. They are afraid of confronting the needs higher up in the hierarchy because they're more abstract and challenging, so they act like they're in survival mode forever.
Let me say that again: In phase 2, it's wrong to be primarily motivated by money. I don't just mean that it's wrong in some kind of moral sense (although I think maybe it's that too), I mean it's wrong because it's not the path to happiness.
But that doesn't mean you have to stop being ambitious. You still have needs, they're just different. Each of us has to decide for ourselves what our goals are. I wouldn't take Maslow's pyramid too literally (like, maybe you aren't literally questing for prestige) but it does give a good framework for thinking about what you need after you have enough money.
Anecdotally, I've noticed some themes in the non-monetary motivations of others who are past the "enough" point:
- Family - Many people want to spend as much time with their family as possible. This probably means minimizing the amount of time spent on your business (i.e. a lifestyle business).
- Hobbies (e.g. travel, art, etc.) - Same as family. Probably your business is just a tool to provide you with enough so that you can pursue other things outside of work.
- Customers - Some people are incredibly passionate about serving their customers. Phase 2 of their business is all about improving the product/service, lowering prices, etc.
- Employees - Similar to customers. A business normally has far fewer employees than customers, but a much higher impact on each one. You can tell a lot about someone based on whether they prefer having a low impact on a lot of people or a high impact on a few people.
- Community - By this, I just mean people who aren't directly involved in your business. This can take many forms such as charity, providing opportunities to people in need, addressing challenges such as climate change or racism, etc.
- Craft - I'm not sure this is the right term, but I'm talking about people who are intrinsically motivated by the thing their company does. Someone running a brewery might just really love beer, and they don't really need any higher purpose than that.
That's not an exhaustive list, but those are the main motivations I observe. Of course, you don't have to choose just one, but I do think many of them are in conflict. To some extent, your business creates a certain amount of wealth, and you can decide how to divvy up the wealth, but it's a zero sum game. If you charge customers less, you'll have less money to pay to your employees.
What motivates me?
Honestly, this is something I'm still struggling with. As I just said, this is sort of a zero sum game. For example, I take pride in providing great jobs, but every time we give a raise to our already well-paid employees, it means we have less money to hire new people. Is it better to offer more jobs, or to pay existing employees more? I don't know! This is hard!
I'm still trying to figure this out, but I have narrowed my primary motivations down to employees, community (especially the local St. Louis community, and especially related to racial equity), and craft (specifically I love designing and building productivity software). Now it's just about balancing those interests.
Even though I don't have this 100% figured out, I had a huge realization when going through this exercise: Family and hobbies aren't on my list of motivations. Don't get me wrong, I care very much about my family and hobbies, but those are not the things that I consider to be "achieving my potential" as the top level of Maslow's pyramid describes (it's worth noting that maybe this is because I've satisfied the "belongingness & love" needs). My purpose will be achieved through work. This may sound stupid, but I find this realization to be very calming. I'm giving myself permission to continue pouring myself into Less Annoying CRM.
Does this mean you stop making money?
Since I'm claiming that your primary motivation shouldn't be money, you might think I'm saying that money shouldn't matter to you anymore. That's not what I'm saying at all. I am still very focused on LACRM's financials, and I devote a lot of my time to growth-related projects.
The key is: Money is a means to an end.
I can't provide great jobs without money. I can't have a positive impact on the local community without money. I can't achieve my product ambitions without more employees which in turn requires more money.
It's totally normal to continue wanting to grow your business, but you should ask yourself whether you're doing it because you want to hoard wealth, or you're doing it because satisfying your higher-level needs goes hand-in-hand with having a bigger company.
What is my "enough" number?
This whole time, I've been talking about what to do when you have enough, but maybe the more important question is: How do you know when you have enough?
Again, this is personal, but I think this number is lower for most people than they think. I mean, how much money does it take to have food, water, warmth, rest, security, and safety?
I'll be totally transparent here. As of this writing (2021) I make $184,000 per year. You might think that's pretty low since I'm the CEO and 50% owner of a business making $3 million per year in revenue. But you know what? It's more than enough. I think I hit enough around $140k. That's when I realized I could afford to buy everything I want (within reason), live where I want, eat what I want, and save enough to feel secure.
I'm not saying that number is right for everyone. If I had kids or lived in a more expensive city, I'm sure my number would be higher. But I don't think the number should be that much higher for anyone. Like, no one is meaningfully increasing their happiness when they go from $900k to $1 million per year.
Having said that, I'm not completely done making more money. Growing LACRM is a prerequisite to achieving my phase 2 goals, and that means the company continues creating more and more wealth. That wealth is being shared with customers, employees, the community, and the owners of the business. So my income is increasing over time, but like all things, it comes down to balance. I'll never be a billionaire. I'll never hang out on a yacht or fly on a private jet. I will continue to be financially privileged, but hopefully in a way that is proportional to the privilege created for the other stakeholders.
As I said above, I still have some work to do to figure out how I want to balance my priorities now that I have enough. But just realizing that I have enough and that I should be motivated by something bigger than money has put me in a much more calm, happy, and fulfilled place. If you're ever lucky enough to find yourself in a similar position, I encourage you to hop off the hedonic treadmill, take a look around, and figure out what your new needs are now that money isn't one of them.
What the haters might say
Hater: If you have other shareholders (e.g. investors) it's not just about what you want. You need to maximize shareholder value for them.
Me: Good point, this is one of the big reasons I'm so opposed to raising money. I'm going to write a separate post on this topic, but the short version is: I think you should try to bootstrap, or if you must raise money, raise from one of the newer investors that allows for founder freedom (let me know if you want recommendations on who those investors are).
Hater: You're a hypocrite. If you really care about other people, you should give away anything not required to meet your basic needs.
Me: Yes. We're all selfish in the same way a billionaire is selfish, but the magnitudes are wildly different. Any time you eat at a restaurant or take a vacation, that money could have gone to help someone less fortunate. We all have to decide for ourselves what level of selfishness we consider acceptable. I consider billionaire-level selfishness to be unacceptable.
Hater: Your enough number is too low. What if your business fails and you're left with nothing?
Me: First off, I strongly recommend long-term disability insurance so that if you become disabled and unable to work, you can keep a stream of income. Besides that, if my business fails, I'll still have all my savings, and most people with the skills to start a successful business also are highly employable. I'll be fine.
Hater: Everyone can choose for themselves what they want. You're in no position to tell me that I shouldn't be motivated by money.
Me: Everyone can also choose for themselves who they want to call a lunatic, and if you think you need a yacht, I'm going to choose to call you a lunatic.