When to stop investing in your business...
When to pivot from internal vs. external investing as an Entrepreneur
For the most part, I tell Entrepreneurs that the best place to invest their money?
Either in their business or themselves.
However, at a certain point, investing more money into either of these buckets will actually create negative returns
I’ll give you a perfect example of this…
Inside of my mentorship business, I’ve found the threshold where the more I invest, the less I actually get as a return, both in the immediate and the future.
I detail this inside a 2+ hour video I recorded (note: this is paid content), however, the short version is this.
In my 3 different growth programs for Entrepreneurs, I take about 480 clients a year, if fully subscribed that’s roughly $10 million a year in revenue.
That 480 limit is based on my actual limits of being able to deliver what I help others with…
No matter if I have 10x more leads, or not.
If I go past that 480 limit, my ability to deliver in the current way would have to be reworked and because I don’t want to rework the entire delivery model (simply because it wouldn’t work), my cap inside of my business is about $10 million/year.
That also means, that the amount I can reinvest into that business is limited.
At the current moment, I reinvest about $1M/year into advertising with another $1M that will go to the infrastructure, team and other expenses.
Now, let’s say I’m not fully subscribed and instead I make $8M instead of $10M.
We’re now down to $6M.
What do I do with that money?
This question is actually what led me to investing in 2019 because once you have money and you made it being an Entrepreneur, you realize you have no idea what you’re doing…
Thus, my rule is very simple when I’m both building, scaling or investing in a business.
Know thy limits
The biggest mistakes I’ve seen in mentoring Entrepreneurs (and a couple times myself) is that we try to scale a business beyond it’s means.
Sometimes, that’s scaling past it’s business model, or it’s founders, or the addressable market, or it’s marketing, or… dozens of things.
However, going into a business, knowing the vision for that business is likely NOT “scale to the moon and back”…
Because scaling to the moon and back only works, if you’re going to sell it to someone else who thinks they can scale it past the moon and back.
I personally don’t like those odds and they resemble a ponzi scheme.
Instead, my belief is that once you’ve hit the “stabilized” period of a business, where achieving exponential growth, it’s time to go wide, instead of going deep.
Here’s what I mean…
Inside of my mentorship business, along with my personal brand, I knew that I had “brand equity” along with true expertise and knowledage inside of the media (I’ve helped dozens of very successful media properties and influencers and built an audience of 500K for my personal brand), software (I was a programmer and built multiple software companies) and education (I’ve helped build over 100 businesses that do 7/7+ figures in online education).
Instead of me “going all in” on my “Scott Oldford” brand or my “Modern Business Academy” brand.
I knew it’s limits and decided instead to build wide, which brought me down the road of advisory and investing.
That means, when I start working with an education company, I know that more than likely we’re going to get to $3-5M within 24 months, however, it’s likely that doubling to $10M is something we may never do.
Simply put… I’ve put my bet on the fact that it’s easier to build twenty $5 million dollar companies, than one $100 million dollar company.
And 20, $5M dollar companies have a larger valuation, sustainability and less risk than a single company.
What you will notice is this…
When I decided to go wide, I didn’t go into something I didn’t know.
I don’t know Crypto.
I don’t know Real Estate.
I don’t know Stocks.
I don’t know a lot of things.
However, what I do know well? Education, Software, Media.
I also enjoy it a lot.
Since 2019, I started moving more and more of my money, time and resources here.
To the point where on a monthly basis, over 80% of my money and time is invested in businesses other than mine.
In order to create the first level of success, focus is required.
However, sometimes, in order to achieve the next level of success and ensure you create diversify and long-term return, it requires going “wide” instead of creating “depth”.
In a literal sense, it’s means…
Don’t over-invest into your business unless you know why…
And at the same time, invest in things you truly understand and have an unfair advantage with…
Start thinking about how you can build a moat around your industry or your skillset and knowledge base.
That’s all for now.
- Scott Oldford