Evolution of an Enterprise, Chapter 14: Bottom-Line Passion

Every small-business owner encounters a tipping point – a time to decide to stay in business or cut their losses.

Evangel University business professor Bernie Dana believes entrepreneurs Jason Mitchell and Michael Mardis may face that question within a year if they continue down their current path.

After four months in business, theworkshop 308 LLC owners have earned about $6,500 in revenues, have spent about $6,100 – not counting undisclosed rent payments – and have $10,700 remaining in their $20,000 startup fund.

After assuming normal rent payments, Mitchell and Mardis are clearly in the red, and that’s OK. New businesses aren’t usually profitable after just four months.

But after reviewing theworkshop 308’s financials, Dana doesn’t see the design studio turning a profit before its seed money vanishes.

However, Mitchell remains confident theworkshop 308 will make money, despite what he calls “a humble beginning.”

“With the work that we have in the pipeline … we’ll be able to sustain this,” Mitchell said. “If we produce a quality product and provide a quality service, then the economic income will come. There’s no doubt in our mind to that.”

Mitchell and Mardis are game for taking varied jobs, such as the massive display rack they built for Staxx Apparel, but they have two primary goals: design environmentally friendly commercial and residential buildings and build furniture.

Dana, who is also a self-employed business consultant, said Mitchell and Mardis could find financial success sooner if they stopped making furniture and focused on designing buildings.

He used the analogy of a hedgehog that curls up with its prickly spines to thwart the attacks of other animals. In the same way, he advised Mitchell and Mardis to find the one thing they can make the most money at and do better than anyone else.

Dana said that’s probably their knowledge of green building designs.

To date, Mitchell and Mardis have built 18 pieces of furniture – none sold – and have designed no buildings, though they have talked to several prospective homeowners.

They have architecture degrees and experience in the field, but they can’t work as architects until they get their state licenses, which they expect to earn by year’s end, according to Mitchell.

Dana said architectural work has lower overhead and bigger paydays – 5 percent to 12 percent fees – than building furniture, which is riskier and requires higher mark-ups and bigger sales volume.

“The furniture may be one of those things that they’re passionate about, and it may be a great hobby, but it may never pan out to be the thing that drives their economic engine,” Dana said.

Dana also mentioned lost opportunity cost as a factor. Mitchell and Mardis, once they obtain their architecture licenses, could earn at least $40,000 apiece working for another firm, Dana said. The U.S. Bureau of Labor Statistics reports that median annual earnings of architects are $60,000.

To equal that income, theworkshop 308 would need to design at least $1.3 million worth of commercial buildings or $2 million worth of residential buildings annually, according to Dana.

Mitchell said they don’t have illusions of getting rich, but they expect to make enough money in about two years for “living within our means.”

“There’s certainly a balance of passion and economic income, but success is also very subjective,” he said. “Money does not define success.”

Mitchell’s and Mardis’ passion drives them to work 70 hours a week, creating and building business relationships while only allotting themselves a salary of $125 each per month. For now, Mitchell lives with Mardis and wife Natalie Mardis, a graphic designer who brings in money for groceries and other bills.

Dana applauded their entrepreneurial spirit and passion, which he said often doesn’t get its due in the numbers-driven world of business.

“The passion is … what causes a lot of entrepreneurs to stick something out,” Dana said. “That’s the healthy side of that passion.”

Mitchell and Mardis say they’re planning to stick it out.

“Who knows where we’ll be in a year?” Mitchell said. “That’s the exciting thing about it right now – scratching the itch of curiosity.”[[In-content Ad]]