Momentum Podcast: 140
Passion Projects Must Show a Profit
by Alex Charfen
Entrepreneurs are driven by contribution. The more successful we become, the more we want to contribute. Many entrepreneurs who have successfully grown a company and experienced a level of success are motivated to do something on the side. That passion project that calls to make a difference, share who we really are, inspire a movement, and provide value in a way different than we ever have. If you want your passion project to be successful, it must show a profit.
Full Audio Transcript
I’m Alex Charfen and this is the Momentum podcast. Made for empire builders, game changers, trail blazers, shot takers, record breakers, world makers, and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution.
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Passion projects must show a profit. I work with a lot of CEOs, a lot of successful entrepreneurs that have built million dollar plus companies. And a lot of them are growing a business, but then they have a side project to passion. Something they love, something they're into. I coach a dentist who's an incredible dentist. She's built an over a million dollar plus practice, Anissa Holmes. And she has a side project that also is over a million dollars, which is teaching dentists how to run practices. That is an intense side project, passion project.
But I've seen this over and over again, where entrepreneurs build a business and then they launch a passion project, but they don't hold it responsible to actually being profitable. I know of one here in Austin, a financial advisor, who is a really good guy and has run a profitable business for a long time, but then started this passion project, this publishing project. He has a magazine that he distributes here in Austin, and last time I talked to him it had been a few years, and that magazine was still costing him money.
Now here's what that means. He has a magazine that he's printing. There's a business that's being run, that's being distributed, is being put out there. There is a lot of time, effort, energy, and focus going into it, but nothing is being paid back. In fact, he is paying on a month basis to run this project. And last time I sat down with him I asked, "When do you think this will be profitable?" and he didn't know. And he answered in a way that made me truly uncomfortable. He said, "Well, it doesn't have to be because my other business is."
Now here's the challenge with that type of thinking. Is it true that you don't have to make money if you can fund your passion project somewhere else? Sure. But here's the issue. Any business that's allowed to exist without creating profitability, any business that's allowed to exist without a plan for profitability, without a clear structure towards profitability isn't a business. It's a very expensive hobby.
And if you have a passion project that you don't hold accountable to actually creating profitability, you're going to screw it up. See, you can't know this intuitively, but maybe I can explain it to you in a way where it will stick.
If you create a passion project, a side project, a second business, something that you are ready to put out there, like Anissa, only she's doing it right. She's making money in both cases. If you create like this magazine project, hold the project accountable to creating a profit. Hold it accountable to actually producing, because if your project is creating a profit, then you have confirmation you're creating value. If it's not, you have confirmation you're making noise. And the publishing project, the magazine that this person has, the friend of mine has, is a great magazine. And I'm sure some people read it. And I'm sure it's something that some people have actually read and absorbed, and they're excited about it. But when I asked him how many people read it? What's the circulation? What's the distribution? What type of penetration are you getting? How many people do you think are really putting their hands on this? He has very little information because the project isn't being held accountable to creating a profit.
And here's this dichotomy, this weird way of looking at it that entrepreneurs have. It's like it's my passion project, so I won't make it make a profit. It's my passion project, so it's okay if it costs me money for a while. It's my passion project, so it's okay if things don't go that well for a while. We'll catch up. But the problem is, if you treated like a business, everything would go better.
If you held your passion project accountable to making you money, you'd be more responsible with the decisions you make. If you held your passion project accountable to making you money, you would make it a better project. And if you held your passion project accountable to being profitable, you would have confirmation that project is making an impact.
On the other side of that, if your passion project is costing you money, then it's an expensive hobby. If your passion project isn't creating value, then you don't know that it's actually there. And if your passion project is holding you back, creating constraint through you having to pay money for it, eventually it will no longer be a passion and you'll realize the massive mistake you've made.
Now in no way am I discouraging you from trying something on the side if you're a successful entrepreneur, if you already have a multimillion dollar business. I think you might be diverting the efforts from the company you have. But if you made the decision and you're ready, hold the new project accountable to profitability. Don't over-fund it. Don't give it too much money. Don't make it lazy and annoying and ambiguous as to what it's really doing. Hold it accountable to showing actual value, and your passion project will actually be successful.
Because for years, I've sat down, spoken to, and helped entrepreneurs pick up the pieces of what's happened to their business and their life when the passion project finally failed. Because if you let it start costing you money at the beginning, you'll let it keep costing you money all the way through. And if you start writing checks to it in the beginning, you'll get accustomed to writing checks all the way through. And if you don't hold it accountable in the beginning, you won't hold it accountable all the way through, and sooner or later, that passion project will become the biggest pain you have.
And I know from where you are now, if you have a side thing you're working on, it might be near impossible to see how it could ever do that to you. But I've done this for a long time, and when entrepreneurs make the decision to have any project move forward, where they invest the currencies of time, cash, effort, energy, and focus, but they don't require a return, it is always catastrophic.
As entrepreneurs we can't give up our cash, time, effort, energy, and focus without getting something back, or we feel taken advantage of. We can't give away our cash, time, energy, effort, and focus without a return or we lose momentum, and we can't give away our cash, time, energy, effort, and focus indefinitely to a passion project or it will cost us everywhere else.
It'll cost your foundational business, the one you're living on. It'll cost you and your family. It will cost you and the team you have. And it will cost, probably in the most painful place, in your passion project. Because when we get into something like this and we don't do things the right way and we break the rules we know as entrepreneurs and we think to ourselves I'll just write a check for a little while, we make the wrong decisions in setting everything up. We do not ensure that we're creating value from the beginning. We don't hold our project accountable, and it can become a noose around our necks.
If you're a successful entrepreneur and you're considering a passion project, a side business, something you've always wanted to try, something you think you can add value, somewhere you know that you want to do something different, make something else happen, one, make sure that your first business is foundationally solid. It has a clear communication system. You know what's going on. There's forward planning there and you can step away with some of your cash, time, effort, energy, and focus to build something else.
And two, hold that new business accountable to profitability as early as you possibly can. Force it to create value in a way where people are actually willing to pay for it. Confirm that you are actually creating value because people are willing to write you a check. And you will see your passion project flourish instead of fall apart.
If you're an entrepreneur who is growing a business and you would like to know more about yourself than anyone has ever been able to tell you, download my book, The Entrepreneurial Personality Type. It is my manifesto on why entrepreneurs are the only source of positive human evolution, and we always will be. Go to freemomentumbook.com. Download The Entrepreneurial Personality Type, and let me tell you more about yourself than anyone ever has. Freemomentumbook.com.
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