“I want to be worth $10 million in liquid assets within ten years,” a reader and aspiring entrepreneur wrote, “so I’m going to open a restaurant. Any advice for me?”
I immediately thought of a scene from Breaking Bad. Walt’s meth production generates boatloads of cash, and the plan is for Walt’s wife Skyler to launder the money via the couple’s car wash.
The problem? Too much cash. “There’s no way we can wash this money through a car wash,” Skyler says. “No car wash in the world makes that kind of money in a year.”
There’s also no way owning one restaurant, no matter how popular, will generate $10 million in net worth in ten years, because how much revenue you can generate — and more importantly, how much profit you can earn — is always limited by your business model.
Featured Video
How Canva Became the Power Player in the AI Design Wars
To generate $7.5 million in revenue, a car wash would have to average $20,500 in sales per day. At $20 a pop, that’s over 1,000 cars. Even if it’s open 24 hours a day, that still means churning through 42 cars per hour. At, say, $30 a pop that’s “only” 28 cars per hour (each and every hour of the 24 in a day), but still.
Not happening.
Now consider a restaurant, where earning a 10 percent net profit margin would put you on the high end of the range. (The industry average is between 4 and 7 percent.) If you hope to put away, say, $1 million a year, you’ll need to earn substantially more; living expenses will eat up a chunk, and so will taxes. Is your restaurant likely to generate $15 to $20 million in revenue a year?
Not likely. Again, how much revenue you can generate, and profit you can earn, is limited by your business model.
But that’s not the only factor you should consider. As you plan a business — or plan to embark on any career path — you should also take time to decide what “success” really means to you.
If your goal is to become a wealthy restaurateur, the economics of the industry mean you’ll need to own multiple locations. You’ll need to build not just a restaurant, but a restaurant business. If you love to cook, building a multi-location restaurant business means you’ll do less cooking. If you love working the front of the house, building a multi-location restaurant business means you’ll do less of that.
Which is great, if that’s your goal. But if your definition of success includes spending every day cooking great food, or interacting with customers… you’re unlikely to feel happy and fulfilled.
The money you hope to make is important. But so is the professional life you want to live.
If you want more freedom to organize your day, you’ll need to build a business with relatively few employees. Leading people takes time. (It should take time; otherwise you’re only pretending to be a leader.)
If you want to own a billion-dollar company, you’ll need to build a business based not on one-on-one, relatively personal interactions, but on technology and automation that can scale to serve millions of people.
“Success” can be defined by a finish line, like a dollar figure. But success should also be defined by doing work you enjoy.
Make sure the business model you choose allows you to do one, or the other.
Or preferably both.