I’ve seen people start businesses for all types of reasons – some better than others. One of the most common is wanting to leave your job. There’s nothing wildly wrong with that, but you’ve sort of achieved your aim as soon as you quit. It’s not a goal you can keep building on.
Let’s say you’re a skilled employee. You’ve been working for other people, earning reasonable money, but you see how much the boss is making off your time. You don’t like some of the aspects of your job – maybe it’s the stress, or the hours, or the inability to solve problems in the way you’d like to sell them. You decide to go out on your own.
‘Going out on your own’ is not a good way to build a business. You should be beginning with the end in mind, not meandering along hoping to replace your income and spend more time with the kids. Those are perfectly reasonable goals, but they won’t build you a valuable asset.
What do you want your life to look like in the future?
- Are you running a large, successful business?
- Have you sold the business and retired early?
- Is the business small, not growing larger, but increasingly profitable?
- Or has it expanded to a second location?
- How much is the business worth?
In other words, how will your business help your future self? For me, the ideal is building a business that will do one of two things. It will either:
- continue to operate without you and give you a passive income, or,
- become valuable enough to sell for a significant sum and give you a lump of money to reinvest and retire on.
Set out with those goals in mind and you’ll have a better chance of succeeding. We know that small businesses have high failure rates – a quarter are no longer operating within three years. The data on why this happens is mainly around the precipitating factor: the tax bill, the divorce, the economic slump. There’s no data, though, on how they started. I’d be very surprised if ‘I’m going out on my own!’ didn’t have a higher failure rate than ‘I’m going to build a source of passive income for my future’.
I have skilled, passionate clients who do a great job of making a living for themselves. But it’s frustrating that they are no better off owning a business than they would have been if they’d worked for an employer all their lives. If they’re satisfied, I can live with that. More often, though, there’s a sense of lost opportunity that I genuinely lose sleep over. Start as you mean to go on – if you want to ‘go out on your own’, set yourself a bigger goal and do what you can to achieve it.