People constantly throw around the term “successful business” or “successful startup”, but I bet if you ask 10 entrepreneurs how they define success, you’ll get 10 different answers. I typically like to ask the following question: how do you define success? Here’s how I define a successful business:
- $1 million+ in annual gross margin (difference between the sales and the cost of goods)
- Sufficient redundancy and scale such that anyone in the business can go on vacation for two weeks and everything continues to run fine
- Reasonable revenue predictability (recurring revenue is best) such that sales can be predicted out on a quarterly basis with 75% confidence
- Profitable enough to make decisions on growth, lifestyle, etc
Notice that I didn’t say it had to be a technology business, or potential for 30% net margins (even though that would be nice), or 50% year-over-year growth. I think those are all nice, and important to me, but for most entrepreneurs I’ve talked to, they are looking for a level of scale, stability, predictability, and freedom (profits!).
How do you define success?