So a few months ago, Rand Fishkin, the co-founder and former CEO of Moz, sent me an advance copy of his new book Lost and Founder.
Now I’ve been a big fan of Rand for years, and I was excited to read the book before interviewing Rand on my Jumpstart podcast.
The book was full of invaluable nuggets of wisdom from Rand (you should read it!), outlining how he did many things the wrong way as he turned his failing agency (SEOMoz) into a $47.4 million annual revenue software company that has received $29.1 million in funding.
Now reading those numbers, you would think that Rand is sitting pretty with tons of money in the bank. It almost seems impossible for that not to be the case.
You would think the software pioneer was making way more money than, say, an agency owner selling SEO services. Let’s use Wil Reynolds, CEO of SEER interactive, as an example.
SEER brings in 33% as much in revenue as Moz and has never received venture funding. Not only that, but agencies receive much lower valuations than software companies when it comes time to sell. Add it all up, and the software mogul should be worth 5-10x as much as the agency owner, right?
Surprisingly, Rand revealed in his book that Wil Reynolds had a significantly higher liquid net worth than Rand himself.
It’s true that more people in the SEO industry know Rand because of his famous Moz Whiteboard Fridays (and that handlebar mustache), and he’s the one who co-founded a heavily funded a software business with tons of users. But his net worth is tied up in his company until it sells.
Wil, on the other hand, has an agency with over 100+ people that provides a few core service to high-end clients. He takes home all the profits each year, and he has been able to create generational wealth through his service-based business… born from sweat.
It’s easy to get drawn in by the “exit” event of a business selling, but I’m much happier drawing profits each year. You probably will be too.
Sweat Equity is your number one business investment
Wil started his agency as a one-man show back in 2002 before the golden age of SEO.
He recognized an opportunity, invested sweat equity, and recruited other people like himself with other areas of expertise in the agency.
But it started with Wil, the founder, and CEO of the company.
Every great business is led by a visionary CEO.
Tesla has Elon Musk
Amazon has Jeff Bezos.
Theranos has Elizabeth Holmes (sorry #toosoon).
In your own service-based business, you’re the visionary CEO.
As CEO, you need to make the number one investment of all – sweat equity.
Building a service-based business that generates millions in revenue and gives you financial freedom takes time.
The average time? 10-20 years of blood, sweat, and tears.
If you want to build your business into a profit-generating asset, you need to be brutally honest with yourself and ask if you can handle this level of commitment.
Are you willing to spend the next 15 years of your life building an asset, with a chance of becoming a multi-millionaire in the end?
When you start a business, you take on a lot of up-front risk for potentially limitless rewards decades later. This type of decision isn’t for the faint of heart.
Think about this compared to a traditional career path where your salary is guaranteed. You take on very little risk while holding a job, you get steady paychecks and insurance, and you can hopefully afford to retire at the end of your working life (which for me is 30 years from now).
So if you choose to build an agency with aspirations of bringing in millions in revenue, you are choosing to take on a ton of risk for exponential reward.
It’s not guaranteed.
Your risk is not just a multiplier, your risk is an exponentiator (or whatever the word is for exponential growth).
So do you want to choose the easy life or the hard one?
Let me be brutally honest with you.
Your journey as an agency owner will be shit for five years, maybe ten.
Over time, you’ll start to grow, and once you get everything running like clockwork, you’ll wonder why you ever questioned that you’d be successful.
So, don’t listen to all those success stories you hear every day on Youtube from some New Yorker with an accent.
Listen to this down to earth midwesterner with a slight Minnesota accent.
Generating business wealth takes a loooong time. But the time you spend has the potential to pay-off exponentially if you commit to the long haul.
Building an asset that consistently distributes profits is the best method I know of for generating personal financial wealth.
Your service-based business can become your asset to generate personal financial wealth.
As CEO of your own business, you need to be willing to invest 110% of your blood, sweat, and tears into building a valuable asset that produces consistent profits (dividends).
But it’s not all fun and games. Your journey is going to be tough. At times, it will feel impossible.
Can you push through the tough times?
Is having success, wealth, and the satisfaction of creating new jobs enough of a motivator for you?
If not, then what is? What is your Big Hairy Goal?
What are you going to do when you reach your BHAG?
How would you feel if you didn’t reach your dreams and took the safe career route?
Most agencies burn out before they reach their goals because they are in it for the wrong reasons. They are chasing revenue and an exit, not investing in building a good business that serves as their cash-cow for decades to come.
And if that doesn’t motivate you, consider this: the taxes on a one-time $10 million business exit are much higher than earning $1 million a year in profit for the rest of your life.