Exploring Business Ownership – Traditional Employment is Not Risk-Free (Part 4 of 7)

In previous articles we’ve talked about the personality types that have the best chance of business ownership success and helped you define your goals for wanting to be in business. Now we’ll explore how entrepreneurs, franchise owners, and employees generally think. Where will you find a match?

How You Think Vs Your Risk Tolerance

As I’ve shared previously, business success is far from guaranteed so it’s important that you assess your tolerance for risk before committing funds to any business venture. One very general way to assess your risk tolerance is by analyzing the way you think.

Generally speaking, there are three main ways to earn income in increasing order of personal risk; employment, franchise ownership, and entrepreneur business ownership. We’ll explore each to see which you identify best with.

The World of Employment

Employee think is:

I did what I was supposed (or told) to do and I can prove it.

If you’re most comfortable with a narrowly defined set of responsibilities, expect your desk (or tools or equipment) to be provided for you, want to call the IT department when your computer hangs up, crave regular working hours with paid vacation and holidays, and expect benefits paid by someone else, then you’ll probably be most comfortable in an employment situation.

When employment is a good fit you feel most comfortable when you do your part as a team member and leave the business consequences of your work assignment to others. If this describes you, take heart! There’s absolutely no shame in being an employee! In fact, most of the business world is made up of employees who willingly do their part and receive a fixed hourly or salary income in return.

Traditionally employment has also had the least amount of risk for loss of income, although that’s becoming less true. For several decades following World War II there was an unwritten social contract between large corporations (and even many smaller businesses) and their employees that went something like this:

If you come to work with us and work hard, then you are welcome to stay with our company as long as you like. We will retrain our loyal employees to take on new tasks and responsibilities because they are our most valuable asset. We will take care of you with good benefits and if you stay with us long enough we will also provide for your retirement.

Contrast that historic practice with the current social norm of viewing employees as a commodity to be hired when needed and laid off when not.

Risk Assessment

Employment and depending on others for income who may not have your best personal or career interests at heart carries the least risk of the three income earning options. But it’s not risk-free and is far more risky now than it used to be. Let me suggest the book The Disposable American: Layoffs and Their Consequences, by Louis Uchitelle, for further reading (I have no financial interest in this book).

Didn’t identify with “employee think?” Check out part 5 where we’ll explore how franchise owners think.

Business Ownership – 4 Things to Consider Before Jumping Into Business Ownership

Are you making the income you desire?

Do you have the flexibility and freedom of time to do the things you love, such as spending time with your children?

Do you enjoy getting up every morning and going to work?

If the answer to any of these is no, ask yourself “why not?” Could it be time to find a new job or career?

70% of the adult population has a desire to be self-sufficient. Only 5% of them ever achieve this through business ownership. Why? Most people don’t know how to research business ownership and fear they may choose the wrong business.

Many people have misconceptions about business ownership. Some feel it costs more than it really does; some feel it costs less than it really does; some feel it is harder than it actually is; and some feel it is easier than it really is.

At one time you may have researched the cost of a McDonald’s, Dunkin Donuts, or Subway (these seem to be the most popular) only to discover you need a net worth of $500,000 or more. YIPES!!

Yes, many of the well-known franchises cost a lot of money. In one respect you are paying for the name. But also, restaurants, which most people think of when they think of franchising, are one of the most expensive businesses you can open.

Most people don’t realize; when you open a restaurant, YOU will own the tables, chairs, countertops, refrigerators, stoves, dishes, cookware, and the list goes on and on. Restaurant equipment can be expensive even for the basics. You may or may not own the land and building, but you will at a minimum be leasing prime real estate which can be costly. But, if you don’t have a prime location, then the restaurant will not do well.

On the flip side, relatively inexpensive home-based or van-based businesses are alternatives to expensive, well-known franchises. Since home-based businesses don’t require a visible storefront, people won’t know that you, the business or product exists. Home-based businesses are dependent on “sweat equity,” your time, money and effort required to advertise and build up a clientele.

For a home-based business you must know the best way to sell yourself and your product or service. Word of mouth can only get you so far. Advertising is expensive and many times ineffective. You must enjoy being out and about meeting people telling them your business is open and what product or service you are offering.

Once you have decided on your business, how do you ensure success? Most businesses fail because of poor planning, which generally leads to insufficient operating funds before the business makes the turn to profitability.

Planning needs to consider the price of the property (buying or leasing), fixtures required, technology required, marketing material creation, graphic designers, copy writers, inventory, research, the elusive operating expenses and personal living costs while the business gets off the ground.

Based on your demographic studies (you did do these didn’t you?) how long will it be before you break even and start taking home a salary sufficient to cover YOUR living expenses? Knowing what price the market will bear for your product or service will help you determine your break-even point.

How many employees will you need and how much will they cost? What will your utilities run? What about your real estate costs – lease or purchase, public building or home-based, fixed or mobile?

YIPES!!! How do you find out all this information? Research! Talk to other business owners. Find a mentor or a personal business coach.

How hard is business ownership? If you think you can quit your 50-60 hour per week job to open a business and only work 30-40 hours a week then you think business ownership is easier than it is.

Owning a business means you don’t have a traditional “job”, but it doesn’t mean you don’t have to WORK for a living!

No one will tell you business ownership is easy; if it was everyone would own a business. Business owners typically (1) find careers they are passionate about BEFORE they make the leap and (2) find the benefits of working for themselves outweigh their hours and hard work.

When you own a business no one makes you work long hours or put in the extra effort except yourself. No one can fire you for leaving work for a couple of hours to go see your children play baseball or soccer. On the other hand, customers can “fire” you if they expect you to be open or to arrive at a certain time, and you don’t.

Unlike a traditional job, when you own a business your income is dependent upon your ability to find and retain clientele, and the perceived value of your product or service. This is especially true for home-based or van-base businesses.

Do you have the itch to own a business? Is business ownership right for you?

You can only answer these questions if you know what you are passionate about, what your long term dreams are, what your strengths and weaknesses are, what your likes and dislikes are.

Business ownership can be scary; it can also be very rewarding. Research your ideas and plan appropriately to achieve the success you want.

A Basic Guide to Small Business Ownership and Managerial Training

Business ownership is an extremely tempting form of income for many people. The idea of creating your own work hours and environment is great, and the constant opportunities for your ingenuity to be put to use would have any creative person asking, “where can I sign up?” Although there are huge perks to owning your own business, there are twice as many issues that come along with it. Between the training of employees, store financing, legal issues and many other things, A business owners head will almost always be spinning.

Depending on the amount of time you yourself will be able to put towards your business, managerial hiring and training will be one of the most crucial initial tasks. Any manager should be able to relay information quickly and efficiently. Additionally, solid leadership skills will also prove very helpful. Give managers insight towards your reasoning or train of thought for important decisions you have made. By allowing them to further understand how your business is run, employees will feel as if they are part of a team and begin showing more commitment and dedication towards improving your overall business.

Regardless of how much is put into the hands of your managers, the basic financing and merchandise purchasing will almost always be left in the hands of the owner in any small business situation. Deciding exactly where to allocate any capital money or earnings can sometimes be difficult. Consider offering short questionnaires to customers that might give you a better understanding of exactly who you are marketing to and which advertisement techniques are working the best. If you aren’t the sole beneficiary of your business establishment or received funding through various investors, there will be a large amount of people awaiting your success. Not only will you have to satisfy your customers, but you will also have to satisfy all your investors and colleagues.

During the initial stages of your business,be sure to work out all details and inform potential investors of realistic outcomes and results – any investor breathing down your neck will make it difficult to make the important decisions you will need to make as a small business owner. Issues that never crossed your mind are bound to arise as your business progresses, and these are only a few of the things that you should be aware of. Be sure to inform yourself of all information pertinent to your business field and location, including competition and consumer-base.