McSmartypants Software

We all hear about the power of compound interest, but when it comes to side businesses, people sometimes stop if it doesn't look like they'll make a quick million.

Let's start off with the end in mind, and show what even humble beginnings can achieve:

In this hypothetical situation, you start a side business that only takes 5-10 hours of work per week.

You use your great sales skills to ensure an unexciting yet "easy" 36% continuous growth.

First, let's start with what the end looks like: earning $20 million in 20 years, by selling a $10 million revenue business.

Sounds pretty awesome, right?

But, this business starts off doing only $10k in revenue the first year.

And, it's only doing $40k in year 4.

The way continuous compound growth works at 36% is that you'd double every two years.

So, $80k at year 6
$160k year 8
$320k year 10
$640k year 12
$1.28 million year 14
~$2.5 million year 16
~$5 million year 18
~$10 million in year 20. And then you sell it for $20 million.

This means you'd have effectively earned $1 million per year for all of that work... you just didn't get to reap any of the benefits until year 20.

But, how many people would've quit somewhere around month 3? Or year 3? Or, even year 10 for that matter?

And, this is assuming steady growth.

The more likely situation for folks with sales skills is that they quickly jump to that $100k mark and then pause for a bit while they keep learning other skills and strengthening their business.

Another likely situation is that you'll have a down year or two or four due to the economy or your industry somewhere mixed in there.

But, if you KNEW you could make $20 million by year 20, and you were prepared for this in advance, wouldn't you still keep at it?

That's the difference between looking for a quick solution and never getting there, and actually having all of your dreams come true within 20 years.

Be in it for the long haul and keep growing yourself and your capabilities alongside the business.

The path of a founder in a successful business varies, but tends to look something like this:

1) Sole-proprietor who has something to sell and spends most of their time selling and fulfilling

2) Then, a sole-proprietor who brings on some help to ease the load of sales and/or fulfillment

3) Then, a true manager who hires people to do some aspect of what they were doing well before and gets those new hires to do well. Operations starts to emerge as a need

4) An executive who has a corporate structure that includes needing to add in things like HR, accounting, finance, legal (etc) to what they do. A good executive manages multiple levels across multiple departments with a clear and repeatable playbook.

5) A leader who inspires others and has leaders in corporate roles that are better and more experienced than them in those aspects. The leader isn't as involved in the day to day and is more about general direction and making a smaller amount of more important decisions.

6) An investor. They are completely out of the business and have delegated everything out. After ~2 years in this role, they can potentially sell the company for its maximum value, if they choose to.

Now, not everyone has to go down this path. And some people try to skip steps, or prefer to hang out at one spot over another. That's all fine.

But, if you think about it like this, it might be easier to wrap your head around how best to grow things.