There are many reasons for someone running and owning a business. Of the clients we work with the reasons for doing so vary from it being a long-held ambition, the result of redundancy, a bright idea, the challenge of ‘doing it better than the current boss’ and a multitude of other, often personal, reasons.
We use the phrase ‘running and owning’ to emphasise the twin aspects of being an owner manager. Ownership can be passive, although usually not for smaller companies, whilst running a business is very active. Both aspects generate demands and pressures and both create the opportunity for immediate and long-term reward.
In considering a new business venture sometimes you just need to act and sort out the implications later. Considerations about your own suitability as an owner manager may be relegated to the future. In an ideal world the considerations about setting up a new business should be as much about your own suitability as the product, the market, the brand, the cash flow or the supply chain etc.
The other key consideration is clarity about the purpose of the business. In addition to determining what value you will deliver for your clients ask yourself what is the business going to do for me in the future? When I have finished running and owning this business what do I want to have achieved and how? In short, start thinking about your exit plan at the outset, and regularly review your progress. A clear idea of your end goal can be invaluable in helping maintain your focus and guide you when making key decisions.
Here are five points to consider when contemplating a new business:
- Can you manage the financial implications for you and your family? Business ownership is usually undertaken to advance your own financial prospects and provide a better and more secure future. The key word is ‘future’ as for most new owners the short-term is characterised by lower income, higher commitments and possibly personal guarantees on a business loan. Any good adviser will help you model the cash requirements for a new business and then repeatedly challenge you with ‘what if?’ questions – both on the upsides and downsides.
- How do you cope with working and making decisions alone? There is plenty of evidence that one of the main reasons for early life failure of a new business is not the product or service nor the financial performance but the ‘loneliness’ of business ownership – especially if you have just moved from a busy corporate role. In reality there are plenty of people around you – clients, suppliers, team members, for example – the problem is having the confidence to share your thoughts, feeling and ideas when you are fixated by your perception that being the boss must mean you have the vision, the capabilities and the answers to succeed.
- How good are you at building and developing a team? Along with managing cash flow and prioritising your time the biggest frustration for owner managers is in recruiting, developing and retaining a high performance team. The frustrations are borne out of how long it takes to recruit, misjudgements based on a poor selection process and impatience with new recruits who you expect to deliver very quickly. You may perceive people to be expensive but recruitment mistakes are very costly so get some help, always have a second opinion and plan for success by recognising that while training is necessary ongoing coaching and good leadership are equally important.
- What is your appetite for multi-tasking? In the immediate post start-up period you will quickly realise that there are many business activities to undertake to keep the business running, often necessitating you learn new skills for example finance, marketing, selling, etc. Understanding and controlling these activities is fine but spending too much time on them and diverting you from your core strengths is a mistake. There are plenty of low commitment and low cost ways to get these activities done by specialists.
- How resilient and determined are you when the going gets tough? And it will. If you have a business plan with revenue and growth targets the graph may look deceptively smooth – but also unrepresentative of what will happen. How good are you at looking for the positives and seeing the upsides without deceiving yourself if there are real problems? One of the valuable attributes of a good adviser is to help you see the real picture and to provide a smoothing effect so the ups do not get out of hand and the downs are treated pragmatically and quickly.
Owning and running a business is a fantastic experience and one we have undertaken since we started in 2003. Preparing yourself for the race and creating the conditions to win involve getting yourself into the best possible frame of mind, being clear of why you doing it, as well as having a great business idea. Good business advice and early consideration of your exit plan have helped many business owners over the years and the earlier you get the support the greater your chances of success – both during the race and when you cross the finish line and sell up. Contact us to discover how we can help you.