Measuring Entrepreneurial Success

May 26, 2014

in Acquisition, Ownership

There was an interesting twitter conversation today in Atlanta about measuring entrepreneurial success. Success is hard to measure. It is personal and means different things to different people.

One obvious form of entrepreneurial success is revenue. That is directly related to success. However revenue is really different for different business types. A company with $5M in SaaS revenue might be worth more than a company with $100M in low margin physical product sales.

Another form is number of employees. There again it can be meaningless. A company with high wage employees might spend more on 5 employees than a construction company spends on 50 day laborers. It is impossible to tell from the number of employees if the business is doing well. Square footage of real estate leased is related to the number of people and size of the operation.

Fundraising is another proxy that is often looked to as a measure of success. Sometimes it means the company has traction and is doing well enough to convince investors to put in money. Many times it means the business is struggling to produce revenue and had to go chase down investor dollars to keep the lights on.

There is no sure way to measure entrepreneurial success. I like to find out how much of the company the entrepreneur actually owns and the size of the business profits. That is a good indicator of how much the business stands to reward the entrepreneur and early employees.

Rate of growth is also a great measure. Fast growing things can demand a premium.

What are your thoughts about how to measure entrepreneurial success?

Comments on this entry are closed.

Previous post:

Next post: