Are You in Love with Your Business or Are You in Love with Business?
One of the members of a small business mastermind group I was running posed this question to the group the other day.
“Are you in love with your business or are you in love with business?”
That might seem like the same question, but the difference in those two statements is enormous. As a business advisor, this is one of the most common mistakes I see new entrepreneurs and small business owners make. They enjoy what they do (i.e., in love with their business), but they don't love the business side of the business and therefore neglect it.
The business side includes things like making sure you're registered to do business in your state, taking care of the accounting side of things, handling accounts receivable and accounts payable, marketing, sales, and doing some planning to ensure that what you are doing at least stands a good chance at being profitable.
Profitability Ensures Stability
The direction statement for my IT company includes the statements “involvement with us will be a mutually rewarding partnership” and “profitability ensures the stability needed to accomplish our goals.”
No one likes to talk about money, but profitability is what allows you to continue doing what you love to do. If you can't pay your bills, eventually you'll be forced to do something else, which does a disservice to yourself and your customers. Focusing on profitability while ensuring that everyone involved benefits from our services is what has enabled us to stay in business for over thirty years.
Love Your Business, but Don't Neglect the Business Part
You want to be in a business that you love. I see a lot of entrepreneurs quit when they have a few rough months where the company either loses money or doesn't have enough left over to pay them. Most people will only push through that if they enjoy what they're doing.
But if you don't learn to love the business aspect of the business, unless you get really lucky, you'll eventually fail or at least stop growing. No amount of love for your business will pay your mortgage or keep your kids fed. Only ensuring that your business is profitable will do that, and that takes some strategic planning and consistently keeping up with the administrative side of things.
A Broken Business Model
I often coach business owners through strategic planning, and it's immediately obvious that their business model is broken when we sit down and put a pencil to it.
Take a massage parlor owner for example. We'll call her Betty. Betty was working full time making $23 an hour and decided to go out on her own because she knew she could charge more and liked the idea of running her own business.
She decided to charge $30 per hour long massage. Pretty good, right? That's a 30% pay increase, and it's less than other people are charging in the area!
Since she expects to see a fair number of people, she rents an office space, which costs her $1000/mo. We won't go into the math of additional taxes and expenses to keep it simple. She also struggles to get customers at first and only sees twenty a week.
This is Why People Quit
It should be evident by now that Betty's business model is not good. If she doesn't sit back and rethink things, she will probably end up closing up shop. Like many new owners, she'll end up going back to work for someone else because it isn't worth the hassle to run her own business when she is making less than what she was making as an employee.
Like most people just getting started out, she didn't understand burden rates and simply thought that if she charged more than what she got paid as an hourly employee, she would come out ahead.
Working on Your Vision
Meeting with Betty, I would suggest increasing her hourly rate of course as a first step, but more than that I would encourage her to move beyond her limited vision of trading time for money.
It shouldn't be too hard to come up with related products and services that she can add to transform into a professional spa and stop competing solely on price. Maybe she could add beauty products, yoga classes, manicures, hair styling, daycare, and become the place to go in town for a full day of pampering and relaxation.
Then she could afford to pay someone to answer the phones, take care of the accounts payable and receivables, and do what she loves to do if she still wants to give massages herself.
Betty won't be able to buy the ten million dollar place on the beach and hire twenty people for her business when she was only making $23 an hour a short time ago and doesn't have many clients yet. Building a company like that TAKES TIME. But she will never create that destination if she quits or doesn't step back and do a little planning.
Start Working ON Your Business
Unfortunately, transformations like I described for Betty only happen if you as a business owner take a step back from working IN your business and start working ON your business. To be successful as a business owner, you have to grow to love business as much as you love what your business does. If you truly want to help your clients, you'll make it so your business lasts a long time.