Sean Steele on Three Business Models That Will Suck the Life Out of You (and How to Spot if You Have One of Them)
Here’s a question I ask founders all the time: if you could go back in time, would you build the same business again?
A surprising number say “no.” Not because they hate their industry. Most of them know their customer and their problem inside-out. It’s because of the business model they chose.
Take Sarah and Jessica. They run a service business that turns over about $4 million. With just ten staff, their margins sit around 50 percent, or about $2 million in profit. They each take home close to seven figures, but what really stands out is this: they take six to eight weeks off every year to travel overseas. When one is away, the other covers, and the business keeps humming along.
Now meet Amanda. Her business does $20 million a year. From the outside, it looks incredible. But her margins are only 5 percent. That leaves her with $1 million in profit, which is less than Sarah and Jessica, despite five times the size. She also travels, but usually with her laptop open, working through her “holiday” while juggling issues back home.
So who’s really living the dream?
(These are real Founders I support with real businesses, I’ve changed their names to protect their identities.)
Why Bigger Isn’t Always Better
Revenue without profit is just stress in disguise. I once bought a $35 million business that was spending $34.9 million to get there. The leaders were exhausted, cash was always tight, and every decision felt like survival. It took us three years of disciplined work to restore profitability above 20 percent.
And I’ve seen this play out across industries. Some founders scrape by on 5 percent margins. Others in the same space hit 40 percent. It’s not that the 40 percent ones are smarter. It’s that they designed their model around profit first, revenue second.
The Profitability Rule I Swear By
Here’s the rule of thumb I give every founder. If your business can’t make at least 20 percent profit, you’re going to feel like you’re running uphill in sand. And if you want freedom, time with family, the ability to travel without guilt, and a business that doesn’t own you, then 30%+ should be your goal.
That might sound ambitious, but it forces you to design a model that actually works.
And I’m not saying you pocket it all.
Half should be reinvested into growth: new hires, better systems, improved products. The other half should build your personal wealth outside the business, like property, shares, or a financial buffer. That’s how you create long-term options.
Think about cafés and restaurants. From the outside, they look glamorous. In reality, very few make more than 10 percent profit (some less than 5%). Most owners grind every day just to keep the doors open. It’s a tough, unforgiving model.
Services can be just as brutal if you’re not careful. Without healthy margins, you’ll spend your life just turning the wheels. You’ll never have the cash to hire good people, improve your offer, or outpace competitors.
Three Business Models That Suck
Here are three traps I see founders fall into all the time – particularly in the early stages.
- The One-Woman Army
If revenue stops the moment you stop, you’ve built a job, not a business. At first it feels flattering that clients want you, but it’s exhausting long-term.
How do you fix this? Start productising what you do and train others to deliver it. Freedom starts when the business works without you.
- The Everything-for-Everyone Model
Saying yes to everyone feels like the quickest way to grow, but it spreads you thin. Every new client is different, every project feels like starting from scratch, and you never build momentum.
How do you deal with this? Just pick one customer type (please!) and solve their problem really well. Clarity beats variety every time.
- The High-Revenue, Low-Margin Model
This one is dangerous because it looks great on paper. Big numbers, lots of staff, a “serious” operation. Also makes you feel like a hero. But if margins are thin, you’re constantly stressed and starved of cash.
How do you address this? Design for profitability first. Price with confidence, cut unprofitable offers, products or services and check your margins regularly.
Design for the Life You Want
The happiest founders I know aren’t the ones with the biggest businesses. They’re the ones with strong cash balances, high profitability, and the freedom to step away.
I’d say only half of the founders I’ve worked with who’ve passed $10 million in revenue feel like they have any real freedom. Let that sink in. Only half.. And it’s not easy building a business of that size as I’m sure you know.
The other half? They’re often trying to scale and sell, not because they’re chasing opportunity, but because the business is slowly killing them and they’re hating it.
Don’t wait for some “pot of gold” at the end of a sale. That’s a bad way to create freedom.
Start making money all the way along. Once you’re past about $1 million in revenue, there’s no excuse not to be profitable and building personal wealth at the same time.
Focus on your pricing, your offer, your cashflow, and your model. Get those right, and most of your future problems will solve themselves.
The Tough Question
So, be honest with yourself: which model are you building right now? And what’s one small shift you could make this month to get closer to the business, and the life, you actually want?
By Sean Steele
About the Author
Sean Steele is a Founder Mentor and Advisory Board Chair who helps entrepreneurs build profitable, scalable businesses that don’t suck the life out of them. He also hosts a podcast sharing behind-the-numbers stories from real founders.
