Many professionals believe they own businesses which are saleable assets that will continue to thrive after they retire or leave the company. Oftentimes, however, what they really have is a “fancy job.” What’s the difference between owning a company and holding a fancy job?
The biggest difference is that business owners have developed something that can carry on without their day-to-day input. The businesses can operate independently. Professionals who hold a fancy job, on the other hand, work in a place that looks like a business but that cannot operate without their constant attention. Which do you have – a business or a fancy job? Let’s take a look.
First, let’s explore what a real business looks like. A business is a legal entity that is created to earn income, fulfill a passion or a need, or provide a challenge. A business is also something that the owner can walk away from for six months or longer while the business continues to grow and thrive. In this case, the business has real value. It is an asset that can be sold because it essentially runs itself, including bringing in steady cash flow. Of course, the time frame or definition needs to be tailored to fit a particular business or industry, but the goal is the same – to create a legal entity with real value.
A fancy job, however, is what many business owners wind up with. This occurs when a company has a business structure, offers needed products and services, has managers and employees, and maybe even a break room and a sign with the company name on it.
The difference between a fancy job and a business, however, lies in what happens when the doors close at the end of the day. In the case of a fancy job, the business stops when the owner is absent or the value is diminished because sufficient attention is not being devoted to the right things. In other words, even if the business survived without the owner, its value would not be maximized. The drawback then becomes that a fancy job does not include a strategy for exiting the business down the road for sale, retirement or death. For some, this is acceptable. For those who want to truly own a business, a fancy job does not suffice.
The good news is that, with the proper mindset, strategies and skills, an owner with a fancy job can shift his or her focus to ensure the business’s longevity and its eventual sale or transfer of ownership. The key here is to choose the fork in the road that translates to more than just a fancy job ? business ownership.
In the beginning, the paths for business ownership and a fancy job look very similar. They have a business entity, a name, a website, employee benefits and more. The business owner’s path veers off to focus on creating a system that breeds success that can be duplicated, controlled and predicted. It also includes an exit plan that maximizes the firm’s value at some point in the future. The path for the fancy job instead veers toward a good, living wage but without an emphasis on extracting value or ensuring that the business survives after the owner has left.
So the question is, “Can I change my path if I want to be a business owner instead of the holder of a fancy job?” The answer is “yes”! It requires some critical evaluation, careful consideration and thoughtful planning, but it is possible to shift gears during any of the phases of your business’s life cycle (start-up, growth, maturity, exit).
Regardless of what phase your business is in, we recommend revisiting your business plan. A successful plan will be simple, specific, realistic and complete. In addition, it should include these critical steps:
1. Conduct a quick assessment using a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) and explaining your underlying strategy.
2. Set objectives, or business goals and how you plan to achieve them. Make sure they are specific, concrete and measurable.
3. Write a mission statement.
4. Outline keys to success.
5. Identify tools and resources you will need to execute your plan.
6. Prepare a break even analysis to ensure that your plan makes financial sense.
7. Perform a market analysis to determine what other successful firms are doing, what has worked for you in the past, and what areas you could improve upon.
8. Take some time for reflection. Let the plan sit for awhile. Then go back and revisit it to see if it makes sense, if it is aligned with your goals and to see if you can successfully bring together the necessary elements.
9. Make the necessary adjustments and put your plan together in a well-communicated, professional manner so that you can present it to key partners.
10. Now that you’ve done the planning, the fun begins – executing, adjusting and getting results!
The question of “Do you own a business or hold a fancy job?” can be a fresh way to look at starting a business or to evaluate your current business. Understanding which path you are on and where it leads will help you take control of growing your business. First, identify your goal. Is it to own a business or to have a really good job? Focus on the path that will lead you to your goal.
Second, identify where in the business life cycle your business is currently operating. Use this internal business audit to understand where you are now and where you are heading. Finally, based on the first two steps, create a plan that is appropriate for your audience. Keep it simple, be specific and realistic, and work toward your goal of truly being a business owner.