As a business intermediary, (a specialist in the sale of privately owned businesses) I frequently encounter buyers, caught up in the myth of a business ownership, who haven’t taken a hard look at the realities. And sometimes the sellers have learned those realities the hard way.
At our company, we say that to be successful, business owners need to score highly on the 3 Ms: money, management and motivation. Most people see money as the major stumbling block to owning a business. It’s true that if you purchase a flourishing print shop or franchise, the price could range from $500,000 to over $1 million. If you’re starting a small consulting business at your own dining room table, your costs will obviously be much less; although, don’t underestimate how quickly expenses such as telephones, equipment, travel, promotion, advertising and taxes will mount up.
Regardless of what kind of business you’re starting (or purchasing), the money to keep it going is as important as the funds to start it up. The bigger your business, the higher your infrastructure costs will be – wages, rent, utilities, inventory and so on. Working capital is an ongoing requirement.
Management is another significant factor in the success or failure of any business. Being your own boss sounds great, but it means you also have to be skilled in a wide range of areas, including bookkeeping, marketing, administration, strategic planning, production, sales, purchasing and more.
You may find you are skilled in some areas but deficient in others. Psychological testing is sometimes used to determine the skills and aptitudes of incoming business owners so a plan can be created to understand and mitigate any shortcomings. This may include hiring or contracting people with skills that will complement those of the business owner.
Certainly, you will find yourself working more and more hours. One myth of owning your own business is the notion that you will be in control of your own time. While owning your business can allow some flexibility in how you plan your day, no one should think for a moment that flexibility equals fewer hours. Be prepared to spend numerous hours in your business.
Sure, you might be able to take off to watch your son’s play at school, but you’ll likely be putting in some extra hours at night to make up for it, because customer demands and deadlines must be met. The commitment to give your business the time it needs to grow and prosper can put a strain on home, family and overall lifestyle. Be sure that your spouse and family understand the sacrifices involved, and that it will continue for at least the first four to seven years of owning your business.
This is where motivation comes in. The necessary commitment of time and money can’t be done without a strong desire to make your business succeed. The motivation of potential business owners is a key factor that must be assessed. In family situations, we sometimes find that the incoming owners are certainly motivated, but for the wrong reasons – they are taking over the business to please their parents. The motivation should centre on your own desire to own and operate a business, not someone else’s. It is highly recommended that you take the time to determine your motivation and consider if it is the reason you should or should not proceed with the purchase or transfer of a business.
Without motivation, none of the sacrifices of being a business owner will feel like they are worth the trouble. As important as money and management are, motivation is essential and can even make up for deficiencies in the other two areas.
Starting or buying a business is a major step that should never be entered into lightly. Take a look at how you stack up on the 3 Ms, give your decision the time it deserves and make sure you go in with your eyes wide open.