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Should you even think of owning your own business?
“Well, sure!” you say, in a knee-jerk reaction. “Why the heck not?”
We could give you about 300 reasons, but we will stick with just a few, so as not to deflate you completely and frustrate the heck out of you.
First, why do you WANT to own your own business? If you do not really WANT it, if you are not really ready to sacrifice both financially and emotionally, you should probably forget it. The demands of business ownership and the resulting stress can cause irreparable damage to your marriage and other family relationships, destroy your friendships and do damage to your health and emotional well being.
Is that kind of negative impact always going to happen? Certainly not. But you need to be aware that it can and often does happen, particularly when the market turns on you and the business falters. Who will turn it around? Those of you who only want “absentee managed” businesses can probably kiss your investment good-bye, at that time. Because no employee will ever care for your business, no hired manager will ever give his/her all to the business, the way an owner will. So, when things get tough, if you do not know the business in the most detailed way and ready yourself to do anything and everything you can to turn it around, devote any number of hours required to do the job, you can forget holding on to it. It can be and often is very lonely at the top.
That can mean sacrificing sleep, weekends, vacations and social or family time, (hence, the strain on relationships); it can mean working even when you are sick; depending on the nature of the business, it can mean forgetting holidays, or radically changing your holiday schedules around the demands of the business.
It can also mean not being part of a peer group, which is something you may be enjoying now, while working as part of a social-employment setting. Being “The Boss” changes things in the most dramatic ways. We know one woman, who was idolized by the people with whom she worked, and was suddenly hated with equal feeling because she bought the company for which she worked. She did not change the pay scale or any of the policies of the business; she simply became “The Boss”, and people – her former friends and workmates – immediately looked at her in a different and very negative way. As stated, it can be, and often is very lonely at the top.
And there is very frequently no one to turn to, when tough decisions have to be made. The buck stops with The Boss. Sure, you can get input from others, but when the final decision needs to be made about who to hire, who to fire, whether or not to give a raise, whether a layoff needs to be performed, when and how much to increase or decrease prices, what to say to the irate Customer that is standing there at the counter, refusing to leave until he/she has a word with The Boss… Well, it can be and often is very lonely at the top.
Yes, you can hire people to do some of those distasteful jobs. (Wearing our Consultant’s Hats, we have been hired by several companies to do nothing but determine which employees should be laid off or determine whether a given individual should be fired, and then do the termination meetings as well. We took the brunt of the screaming and crying, but The Boss was the one with whom they were really angry. And ultimately, in any number of ways, those laid-off employees found a way to communicate their displeasure with, and directly to The Boss.) But there is always a cost involved in that kind of subcontracting. Some of the cost is just that: Cost; an expense; money out of your Profits and therefore, out of your own pocket. Some of the cost can be in a loss of being in touch with what is going on. The more you delegate any responsibility, the more you can lose track of what is actually going on in your business. You need to delegate, in order to grow the business; but you need to balance that with better communications and other tracking methods, in order to maintain knowledge of the business and enable you to stay in control.
On the other hand, there are a wide range of reasons to be in business for your self. There is nothing more rewarding than patting yourself on the back when things go well and saying, “I did that!” There is a thrill of accomplishment that is like no other; it can be a real rush, much like an athlete winning a big race or making the winning score.
And while there are dangers from personal stress on you and your relationships, there are tangible characteristics of business ownership that CAN BE extremely lucrative. There are Tax benefits that you cannot obtain as an employee. There is Appreciation of Value in the business that can allow you greater borrowing capabilities, and ultimately a greater Sale Value when it is time to sell the business and buy something bigger, or simply take the profits and retire. (Although, how much your business is worth and whether it can even be sold, at a later date, is not always a given. The kind of business and the kind of business management are keys to this issue, every bit as much as the level of profitability.)
A real keys to a decision of this kind is in knowing your own expectations and how they can realistically be met, by owning your own operation. What are your own strengths and limitations? How much can you live on, financially? And what are you willing to give up, in order to achieve your goals? Frequently…very frequently, your goals and your lifestyle will be in direct opposition with each other, at least for some time, as you start out.
Answering these questions is partially a product of realistically understanding the demands of that particular business. And realistically knowing the potential risks and rewards.
Note that “realistically” is mentioned in several instances. That is because people frequently get “gold fever”, in making decisions of this kind. Whether it is for money or some other goal, they lose their reason, in spite of cautions thrown their way.
We once dealt with a very intelligent software engineer, who wanted out of his job so badly that he seemed to lose all contact with his normal common sense. He decided he wanted to purchase an automotive repair operation, and while waiting for the SBA to approve his loan, he took partial control of the business and began investing in it, in order to update it and expand the business’ capabilities. We told him from the beginning that, since he had absolutely no background in that business, it was not a wise acquisition; we told him to get an Accountant involved, in order to perform due diligence on the business’ financial health; we told him not to get personally, financially involved until the settlement actually took place; and we almost threw ourselves in front of him when he made the decision to start writing checks to invest in the business, before settlement occurred. Knowing how we felt about that latter issue, he wrote his checks without our knowledge, and hid that fact from us, until the transaction crashed down on him! We got him his deposit money back, but he still lost over $100,000 in the checks he wrote for the benefit of a business that ultimately was worthless, and was taken over and ultimately dissolved by the Federal Government.
This is why writing a Business Plan is such a vital thing, when considering going into business for your self. It makes you reflect on the widest possible set of criteria for entering into the business, and helps temper some of the irrational thoughts on which some of us might otherwise act. (More about Business Plans in future posts.)
These are topics where, once again we hear some guy in the back row saying, “I know a guy that had none of these problems…” Or, “When I started my business, it was all fun and games…”
Sure, there are those experiences. But the key is to understand and plan for the worst case scenarios, because the worst case scenarios are the ones that can bury you, if you are not prepared. And by prepared, it means physically (where applicable,) financially, mentally, it means preparing your family and potentially your friends… It means foreseeing these circumstances and having a plan in place for these eventualities, BEFORE it is an hour before you are to leave for Bermuda on the first vacation in three years and the night shift person calls in sick, with no one to replace him/her. It is knowing that your Christmas Inventory is coming in, your latest sales have been soft and you have not put money aside to pay for the Inventory that will provide for 80% of the Profit you will make in the entire year. It is understanding the traffic patterns of your location change seasonally, and not hiring people that require 40 hours of work every week throughout the year, and then being disappointed when you cannot give them the hours they need, and they go elsewhere for employment while leaving you with no staff.
Planning and anticipating and being realistic about alternatives are huge factors, in the success or failure of any business. Can you do that? Do you want to do that? Because that is what owning a business is all about. And you know, it can be and often is very lonely at the top.
(Receive in-depth, personal consulting online, with The BAF Group’s principal at https://clarity.fm/donaldbarrick .
The BAF Group LLC is a full service Business Brokerage, with a history of more than a decade of service. Its Principal Broker possesses 25+ years of Business Sales and Divestiture. Although most of our work is involved in the Mid-Atlantic States, we have represented Sellers and Buyers throughout the Continental USA, and a number of overseas Buyers, as well. Some of our listings and additional information about us can be viewed at www.bafgroup.com. Thank you for your interest.)