A secondary reason on why people start businesses

It’s no secret that the last 12 months haven’t been fun if you’re selling technology.

By far, these are the worst conditions I’ve seen in my career. People are making a lot of comparisons to the aftermath of the dotcom era.

This is probably not news to you.

I saw a post recently on LinkedIn about how salespeople are having to deal with the thorny questions that finance folks like to ask, in a way that simply hasn’t been a part of the sales cycle for years.

But focusing on salespeople isn’t what I want to do here.

Let’s think about who loses when finance takes the reins of the buying process: the buyer.

90% of people love to spend money


You don’t want the remaining 10% as customers

My mental model of McKinsey Consultants

Why do people join McKinsey?

  • It’s prestigious
  • It pays well
  • The exit opportunities are good
  • You get to work on really big strategic projects

But a secondary side effect (that I think is a much bigger motivator than we acknowledge)

  • You get to fly business class to lots of new places, stay in hotels and collect thousands of dollars in points that you can then parlay into lavish vacations

For most college grads, this is a pretty enticing side benefit.

Enough to sway some from a finance or tech role where they might make more… but remain confined to a single city.

I’ll admit, being able to use those accumulated loyalty points for an annual vacation where you fly first class and then stay at the Mallorca St Regis, or perhaps the Ritz Carlton Tokyo for $0… is very compelling!

It’s raining in New York right now.. I’d rather be in Spain

What does this have to do with startups?

Let’s talk about why people start companies.

There’s the obvious

  • It’s prestigious
  • Opportunity for outsized results
  • You get to chart your own course

But I think the secondary side effect (which again, I think is a much bigger motivator than we acknowledge), is that you get to spend a lot of money.

Spending $250,000 a year as a consumer is American Express Black Card territory.

It’s a small club.

But spending $250,000 a year as a business owner?

That’s a very small business!

My parents run a small business in New Zealand that sells mobility scooters.

If you ever have questions about mobility scooters... I am an expert

I was talking to my dad the other week, and he talked about placing a big order with a supplier. He’s had to buy a new van recently because an employee totaled one (thankfully no one was seriously hurt).

My dad doesn’t spend a lot of money in his personal life. But I’m convinced he gets a lot of the same dopamine release when he spends money in the business. After all - not only do you get to spend money, you’re also able to tell yourself a story, that you’ve just “invested” in your business.

Now I’m not saying that consumer spending and business spending is entirely the same thing.

Obviously spending $20,000 on a holiday is more enjoyable than spending $20,000 on new laptops, legal fees or a new API solution (everyone agrees, spending on recruiting fees is the one exception that brings universally positive feelings).

But I do think it’s a question of degree.

While working your way out of a stressed cash flow position can be hell.

Being on the other side of that equation - having some money to burn is a lot of fun.

You’ll often see sour grapes comments from bootstrapper types on Twitter. They’ll talk about how it’s unfair that Venture Backed startups get so many column inches and all the glory, while they’re in the trenches, being conservative with their cash, and growing slowly.

Venture capital is sort of like winning the lottery, with the stipulation that you have to spend the money on business related things.

It’s inherently exciting!

Forget what you’d do with $1m.

Hell - forget what you’d do with $10m.

What would you do if I gave you $50m and told you that winning meant coming back in 3 years asking for more, but first, you need to go out and spend most of that money.

Sure, you can’t go out and buy a mansion and a fleet of supercars (yet).

But you can rent office space in the nicest part of town.

You can fly around the world meeting customers and attending conferences.

And you can have as many fancy dinners as you’d like - provided you’re entertaining clients or running a team building event.

It’s not the worst trade in the world.

In some ways it’s a lot better than having a whole lot of money and then no reason to get out of bed.

Most people want to spend money

It’s not just McKinsey Consultants, Mobility Scooter Entrepreneurs and Startup Founders who like to spend money - it’s almost everyone.

There are so many stories of Government departments blowing out spending so they don’t have their budgets cut next year.

And corporate departments - doing the exact same thing.

Half the time that fiscally minded, venmo’s you for an $8 beer type… is more than happy to spend like a drunken sailor (when someone else is footing the bill).

Spending money feels GOOD.

It’s important to remember that - especially when it feels like human nature has changed.

It hasn’t.

The CFO won’t have a vice grip on expense management forever.

Here’s my key point.

People want to buy.

They want to buy from YOU.

CEOs are going to have a very limited amount of patience for the bean counters getting to kill deals.

And the good news.

We’re already starting to see a thawing across pipelines.

Deals are starting to warm up again.

Last week Salesforce announced they’re hiring 3300 additional people.

We’re not going back to 2021 or 2022 any time soon.

But we are seeing things move in the right direction.

If you’re thinking of hiring salespeople for early 2024, now is the time to get started. If you’d like to explore working with me, book a call here.

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