[Issue 9] The Ownership Principle
Why treating your business like an asset is the key to financial sustainability
[Photo by Silas Köhler on Unsplash]
The Odysseus Files, Issue 9
Architecting Your Ithaca, Part 2
Breaking the Cycle
[Note: this is Part 2 of a miniseries within the broader Odysseus Files called “Architecting Your Ithaca.” These miniseries will group broad topics thematically, helping you connect the dots between them more easily.]
TL;DR - Scroll to the end for the takeaways!
As entrepreneurs, are we building ourselves jobs or a future?
If we’re not careful, we can get in the hustle mindset of chasing - new tactics, new leads, new products, etcetera. Some of this is necessary, of course: when you’re first launching your new business, landing those first few sales, creating your first few products, and iterating how you get in front of people is unavoidable.
But how long are you allowing that to last?
If that hustle becomes a habit, you end up spending your time building a job - every day, you’ll have to show up and keep doing the same thing in order to make ends meet.
Way back in Issue 4 we labeled this a “churn & burn” business model: chasing new leads, dragging them through the funnel as quickly as possible, then leaving them high and dry while we chase the next one.
Disrupting this cycle is the key to building financial sustainability in our businesses.
Optimizing for Sustainability
Last week we defined financial sustainability as “the ability to maintain financial security regardless of external circumstances or your own time spent.”
We reviewed some of the data around risks to personal finances then transitioned to a mindset shift we need to make, from thinking like an employee to thinking like an owner/investor, in order to build resilience to these risks in our lives and businesses.
What does it look like to bring that ownership mentality into our businesses?
We’ll get to that shortly, but first, a brief foray into why we should consider ownership in the first place.
The Two Paths to Financial Sustainability
The first is, simply, requiring less to live on. If you move from a more expensive area to a less expensive one, for example, you’re gradually improving your financial sustainability, because the new lower cost of living means you can absorb more shocks to your financial system.
You can chase this path quite far: follow the homesteading, off-grid living, or small house movements online to see this in action. By reducing dependence on outside resources to survive, you increase your resilience.
If you’d prefer not to build anything beyond your own little world that meets your needs and sustains you through change, that’s a perfectly reasonable route to financial sustainability.
If, however, you want something a little more than that - the ability to leverage your world to positively impact the broader world around us - you need to take the second path (or, preferably, combine them).
(Look to next week’s issue for an argument in favor of optimizing for impact as well as sustainability; combined, the concept of “sustainable impact” is one of the most crucial within The Odysseus Files, as well as the broader Acropolis Publishing universe.)
This second path, of course, is ownership (specifically, of a tool that grants you leverage; i.e., an asset).
An asset at its core is simply anything you own that can create future value for you. Its link to sustainability is that it’s meant to be an extension of you: instead of you having to do the work yourself, your asset works to deliver the desired outcome. This frees you up to pursue something else.
Most entrepreneurs think in terms of tasks:
They’re an expert at the thing they do (the product they make or service they deliver). But their focus is often more operational. Michael Gerber describes this mindset as the Technician role in his popular business book The E-Myth (one of the three personalities of any business owner, and the one where most owners spend most of their time).
The problem is, this results in spending more time working in their business instead of on it.
To optimize for financial sustainability in your business, you need to balance your inner Technician (likely why you started your business in the first place) with this ownership mentality.
The Ownership Principle Applied
Financial sustainability in your business is the consequence of just a handful of things:
A reliable way of bringing more customers in
Happy customers that keep buying from you over and over
When you build things that facilitate both of these without your direct involvement, you have assets that work for you.
There are two asset types we’ll discuss here in more detail that address each of these points above.
The first is a flywheel. Author and business consultant Jim Collins, in his book Good to Great, highlights the role that flywheels play in the greatest companies.
Drawn from the mechanical flywheel - a large wheel that captures rotational energy from momentum - the concept is that certain efforts or systems can be built into your business that, with time, can largely sustain themselves.
Nathan Barry, founder of the email platform ConvertKit, lists three criteria for an effective flywheel:
Activities flow smoothly from one into the next
Each rotation is easier than the last
And each rotation produces more than the last
(His article on the subject, linked above, highlights a number of examples of how this applies to the creator space.)
Most businesses are focused on getting more customers, but struggle with the reliability part. Creating the right flywheels can help address this.
The problem is that, in their effort to get new customers, many business owners forget the latter point - that simply taking good care of past customers can contribute a lot to the sustainability of the business.
But I don’t just mean sending them a post-purchase survey to check if they enjoyed your product…
What brings customers back over & over, spending with your company and telling others about you, are:
A sense of excitement & intrigue
A sense of community & being part of something “bigger” than themselves
A sense of belonging & identity created through shared values & worldview
Creating this happens through the brand experience you deliver.
We’ll cover this in more detail in future issues, but a concept that encapsulates this idea of brand experience is “worldbuilding.”
If you settle for thinking of experience in terms of traditional “customer service,” it’s hard to create much of an asset out of it. But if you think of it in terms of worldbuilding, then every additional piece you add to the world you create and invite your customers into is an asset, creating a positive flywheel effect:
Everything you build in your world increases the value of your world to your best customers
Those customers develop a sense of intrigue, community, and belonging within your world
The deeper they go into your world, the less any other competitors are relevant to them
And the more excited they are by your world, the more they tell others, who come in and experience it
Your world is a mix of ideas, worldviews, values, identity, and more, expressed through content, offers, interactions, etcetera. What makes it your “world” is that there are common threads tying all of this together - when your customers see something about you expressed in “the wild” (i.e., from some other source than you), it’s immediately recognizable, because it’s clearly part of the mosaic making up your world.
We’ll go much deeper into this idea in later issues of the “Build a Castle, Not a Village” miniseries. The relevant point here is that thinking of your business in terms of a “world” you’re building can help with the mindset shift to thinking like an owner. And, as you build that world, contribute directly to how financially sustainable your business is.
Takeaways
A critical principle underlying both of these last two issues on this topic of financial sustainability is that optimizing for sustainability requires thinking long term. Creating a clear vision in your mind for what sustainability looks like for you. Then building back from that to arrive at the steps you need to take now to get there.
In your personal finances: what do you want out of your ideal lifestyle? What would you need to survive in a worst case scenario?
In your business finances: what does your world look like and how does it keep your best customers hooked on your brand? This world becomes your single greatest asset, with all others flowing from it.
If you’d like some help getting clarity on all of this, I have two items coming out before the end of the year that can help you create your vision going into 2024:
A short book called The Acropolis Model that gives you a framework for building your world in a way that will keep people coming back over and over again
A standalone coaching package called the Acropolis Vision Crafting session that will help you get clarity and confidence in your vision and provide you with a roadmap to execute on that vision into 2024
The coaching package will be a beta version, which means I’m offering them at 40% off, but only for the first four people to sign up.
If you’re interested in either of the above, hit “reply” and let me know. You’ll be first on my list to contact as soon as these go live.