Today is the five year anniversary of my first Custom Strength client. I’ll be honest that I am very proud of myself for the business I have built since the first client I trained under my own business name.
Like most entrepreneurs, I tend to deflect accomplishments to others when they are brought up. Instead of accepting the compliment, I mention all the great people around me; that I couldn’t have done it without the support of my friends and family; or that my amazing clients make it so easy. All true. But the other truth is that I had a great vision and then worked my ass off to build that vision. And now I’ve got this thing I call Custom Strength; this place I go to every day; this thriving community of amazing people working hard to be better; and it’s awesome. And the reason this awesome thing exists is because one day I decided to quit my lucrative consulting career to pursue my passion.
This is the point in the story where people often say they never looked back. I’m here to tell you that those people are liars. We all look back. Every time things get shitty – and I don’t think there’s an entrepreneur in the world who hasn’t been through a shitty period – we look back. I have often thought about how my life would be if I had stayed in the engineering consulting world. The money was sure good, as were the hours, and those combined for some fantastic vacations. Those thoughts still lead me to the same conclusion though: opening Custom Strength was one of the best decisions I ever made. I say this 5 years in, at a point where I still take home less money than I did before making this change. Although 2016 is looking like it will be the year where my hard work and vision reap financial rewards that surpass those levels. *knocks on wood while typing this*
Deflection of accomplishments isn’t the only thing that prevents entrepreneurs from tooting their own horns and acknowledging success. Relativism is the other. I almost succumbed to it. Not only is Custom Strength five years old, it is also healthy and growing. Despite that, I almost stopped myself from celebrating this accomplishment because there are so many businesses that are bigger and more profitable than mine. Some have been around longer, some started with money (I started with a huge debt from a previous business), while some are newer and also started without money. In other words if you look for it, you will find an example of someone who has done better than you. I’m excited that I have finally reached the level of entrepreneur where I can celebrate my success in relation to my hopes and goals instead of in relation to what others have done. I’m quite certain I’m not the only entrepreneur who struggled with this.
Five years! It has been both a fun and challenging ride.
The fun mostly involves what I actually do, which is training clients. People often talk about thankless jobs. I have a thankful job. It’s amazing. At least a couple of times a week someone tells me about the things in their life that are better because of their training with me.
It’s a good thing the highs have been so great, because the lows really, well, sucked. Like that time I came back from a Christmas trip to find out that the gym space I was renting had flooded from a leaky roof and the landlord decided he wouldn’t fix it until April. I’m not talking about a slow leak here; I’m talking fills-a-bucket-in-an-hour leak. Good times.
Then there was the time – just 9 months ago in fact – that I almost bankrupted my business. Imagine how you would feel when you did the books and realized that the numbers don’t actually add up and that if you don’t fix your spending, and increase your revenue right away, you won’t survive another month. That was my introduction to tracking churn rate. I had always prided myself on tracking business metrics, but it turns out the metrics I was tracking were insufficient for growth periods. I moved into a bigger and more expensive space in 2014, which required financing for moving costs, some new equipment, and a 2.5 time increase in rent. When I looked at my numbers, some were hidden by extra money I had borrowed to cover those expenses, while net revenue shortcomings were easy to explain by the temporary new expenses I had incurred. The big lesson I learned there: Never look for a way to explain revenue shortfalls; look for ways to uncover what they really mean. It’s a very minor but crucially important difference in perspective.
Thankfully my friend Pete and I were talking about our businesses and he mentioned that one of the reasons investors were so interested in his company was that their customer churn rate was so favourable. He then asked what my churn rate was. I didn’t know, but I was confident it was good because our clients mostly stick around for a long time. The next day I pulled the relevant data together and calculated it. I also looked at client acquisition rates, and used the two together as a predictor of growth or decline. That was eye-opening! It turns out there had been a two month period just before we moved where we lost quite a few clients. They were all for normal life reasons, like moving out of town, as opposed to dissatisfaction with training, so I hadn’t really given it much thought. But that followed a period where I did no marketing because I was so focused on moving and getting the new space running the way I wanted, and then because everything appeared to be running so well in the gym, I focused my attention on two side projects: my hip training ebook and preparing presentations for a few seminars where I would be speaking. In other words, we lost clients and then spent the next six months not replacing them.
While doing churn rate calculations, I also dug deeper into all of my business financials, which lead me to realize that I had to make changes to some of my expenses or I wouldn’t survive. Even if I increased revenue, my monthly expenses were just too high for this to ever be a strong business. That meant making some difficult decisions, which was no fun. Had I been tracking churn and acquisition rate, I would have realized that I had lost those clients and hadn’t replaced them, and I could have addressed it before it became a problem. Knowing my churn rate allows me to predict if a revenue drop is coming, which allows me to address it before impact. Had I also done a better job of splitting out investment money from revenue, I would also have come to the same conclusion earlier than I did.
I’m still slightly embarrassed that my inability to properly assess my financials almost cost me my business. I mean, I’m a numbers person! I use the expression playing with Excel instead of working with Excel. How on earth did I not see this coming? I was so embarrassed that I contemplated not including this in this post. After all this post is really about a celebration. But then I remembered reading stories like this from other entrepreneurs and how helpful it was to me when I was feeling overwhelmed. So there you have it – the lows in my entrepreneurial process included a big dumb mistake that almost prevented me ever getting to this five year mark.
Five years! Since that financial debacle there have been far more ups than downs, and business is good. That scare forced me to do what I had to in regards to expenses and to put more time into marketing such that we are growing at a good but manageable pace, which means I’m not celebrating that my business has survived for five years; I’m celebrating that my business is successful five years in. In addition to allowing myself to feel pride in this accomplishment, I also decided I should buy myself a five year Custom Strength anniversary gift. A new pair of skis seems like a good gift. Here’s hoping Mother Nature will help me celebrate by providing some snow!