Updated: May 2, 2019
You can pay the bills, take a vacation (or two!) and know that it’s okay to duck out early on Fridays - okay, also on Thursdays - you’re comfortably profitable. The interesting thing about this state is that for most entrepreneurs it’s newly acquired. “Comfortably Profitable” sounds like a positive statement. In reality, this term is a cautionary tale.
My experience shows that small business owners work incredibly hard to establish the Comfortably Profitable State or CPS. They hustle like their life depends on it to create enough revenue in their business to pay all their expenses, hire necessary employees, and maybe buy a couple of nice items to pad their false security or celebrate their recent hard work. They have “finally made it!”
They have worked so hard to get to this state. So hard that they decide that they have earned a few deep breaths: a moment to stop and smell the proverbial roses. For the record I completely agree that we need to celebrate every success and victory that we earn. Without question getting your business staffed and profitable is a huge accomplishment that calls for a celebration. But how long can you breathe and celebrate?
I’d admit after such a milestone, and the relaxation that comes with it, it can be difficult to find that top gear especially once you get a chance to work at a more comfortable pace. For many, this lasts years. For some, it’s the rest of their career. Either way, it’s too long.
The ironic thing is that most people that have the commitment and ambition powerful enough to get this far usually become frustrated with themselves and their business when they never realize that next level. The sense of satisfaction that you once had is gone which leaves you without passion needed to continue to grow. And this is how you can get stuck in CPS.
And CPS is risky. Why?
You and your business are at risk of failure. Entrepreneurs that are in this state usually have only a few months safety net built into their financial plan. Most would agree that if your business is not growing, it’s actually shrinking
Missed opportunity is a terrible thing for any achiever. When you stop constantly looking for business growth opportunities you won’t find the opportunities you haven’t prepared for.
I previously mentioned not having to work an excessive amount as part of the Comfortably Profitable formula. For everyone that measurement is different at different times in the growth of their company. I’ve found that entrepreneurs while building their business work at a 90% of their optimum rate. Even the highest achievers have imperfect performance - we’re not robots after all and life happens!
But once they achieve profitability they coast their way down to 70%.
Let’s spend some time on the 20% drop. At First I thought this wasn’t a huge number. You could look at this decrease in effectiveness across all activities, roles and responsibilities that the entrepreneur has within the business. Unfortunately that isn’t accurate. Things like payroll, accounting, HR, customer support and planning still need to happen at a 90% rate to ensure that the business stays open. Don’t pay your employees, they’re bound to walk out.
That leaves very few areas that can accommodate the 20% decline in effort or better known as work product. These areas almost always affect business development. Who needs a new customer when you are already profitable? Customers are hard to get and manage, right? These are the questions and statements you make in your subconscious when you are in the CPS. They allow you to easily go into work and be busy with a variety of “important” work while neglecting key pieces for growth. This is the CPS in action!
Disclaimer: The CPS is untraceable in others. Most people in the CPS look happy, relaxed and financially stable. They are usually the entrepreneur most emulated by others. It’s another irony: no one idolizes the person who works so hard they bleed out their eyeballs. It’s much easier to focus on the luxury lifestyle entrepreneur.
The only one who can identify the CPS is us, in ourselves. This is generally why it is so hard to break the cycle. We are comfortable and profitable - enjoying life to the fullest. Right?
It sounds like utopia. Why even care to break such a wonderful state? In addition to the risks of the CPS listed above, I can answer in one word: ambition. Our ambition is like a rudder on a ship that guides us to places we aspire to be. Without properly managing our ambition we feel lost. A lost entrepreneur can be dangerously passive. Passive and business growth minded are two things that can not coexist.
So don’t be passive. And don’t be comfortably profitable. Always look to grow. Accept that being uncomfortable in business is the best business. You might even say that getting comfortable with discomfort is at the root of all growth minded entrepreneurs.