It sounds obvious (and a bit cheesy), but that doesn’t make it any less true.
Prior to 2008, my agency—like many others—relied heavily on growth through marketing and technological engagements. But with the economic collapse felt around the world, clients quickly slashed their marketing and technology budgets, and our steady growth model was rudely interrupted.
Rather than desperately pushing for additional marketing support and technology, however, we pivoted our attention to another passion: the craft beer market.
It wasn’t purely the panache, culture, and fun of brewing that attracted us to this industry; it was the chance to expand and engage with a whole new market on a meaningful level. So we analyzed the risk and took a chance.
Pursuing your passion is exciting and can lead to great success, but you have to follow certain principles. Here are a few insights I picked up throughout my journey:
1. Think Rationally
One of the biggest hurdles you face when you build a business around a passion is making haphazard decisions based on instinct rather than rational thought.
In the case of a brewery, for instance, you might be tempted to create 10 to 15 different formulas. However, if you fail to account for all the labeling, packaging, legal, and distribution fees for each formula, you’ll quickly find yourself accumulating expenses. And without any profits to cushion the blow, your business will likely fail.
Avoid the tendency to get sucked into a “believe what you want to believe” mentality. Calculated risks are to be expected, but you must have a practical plan in place to avoid veering off course.
Projections and pro forma financial statements are great ways to gauge a potential opportunity, but you have to approach them objectively. If not, they’ll simply reinforce the flawed confidence behind the idea.
In an effort to counter the excitement that surrounds a new opportunity, try cutting 20 percent or more off your projections. Having an independent third party assist in this endeavor is also a good way to compensate for overly optimistic projections.
2. Prepare for Challenges
Understanding the inner workings and demands of an industry before you dive in headfirst can be the difference between success and failure.
Because we needed a middleman to legally sell to bars, for example, we had to navigate the system of wholesalers. However, with vendors spread across the country, it was no easy task. At one point, we logged roughly 1,500 miles traveling across the Northeast simply trying to convince wholesalers that we had a viable product.
Depending on your industry, you’ll be presented with a unique set of choke points to deal with. The important thing to remember is that you’re never going to be able to do everything on your own, so it’s important to establish reliable and healthy relationships.
And for all the difficult challenges they present, there are immeasurable benefits to pursing a passion project. When you’re delivering a quality product that you care about, you’re more inclined to avoid cutting corners and face challenges head-on, which will benefit your business in the long term.
3. Research, and Know Your COGS
Regardless of the industry you occupy, if you’re charging a premium for your product, you have the potential to make much higher margins. Not only that, but supplying a premium product can lead to greater satisfaction for both you and your customers.
All businesses have a cost of goods sold (i.e., all the expenses involved in making your product or service), and whether you’re making beer, manufacturing T-shirts, or washing windows, you need to diligently track it.
COGS is more difficult to pin down in the service industry because hidden costs can be easily overlooked. However, a product-based business has tangible items and costs, which can help you understand major COGS principles and apply them to a service-based venture.
Whatever your business, compare your COGS to your price, making sure your price is never lower than your COGS. If your price dips below your COGS, you lose money every time you make a sale, which is never a good thing.
Pursuing any new venture can be risky, but straying away from what you know to do something you’re passionate about can be even more frightening. So the best thing to do is take it one step at a time. Remember, you don’t have to get everything done right away. Set achievable goals that will help you reach your desired result over time. After you’ve taken the first step, that motion will carry you forward, and the satisfaction you experience in pursuing your passion will be worth it.
What advice do you have for pursuing your passion?