Episode 44 – Do You Own a Business or Just a Job?
Episode 43 – How Much Should You Budget for Advertising?
December 30, 2016
Episode 45 – Should You Hang Out with Your Employees After Work?
January 4, 2017
Most Small Business Owners Bought Themselves a Job
In today’s episode: We discuss how most small businesses owners actually own a job and not a business. We will talk about how to tell which you have and what you need to do to go from Job to Business Owner
Here are the Show Notes from the Episode:
**keep in mind that show notes are raw and only highlight what is in the episode. Listen to the show for the full content**
Episode 44 – Do You Own a Business or Just a Job?
The Local Small Business Coach Podcast
When you think of owning a business you think of it as a standalone entity. Something that could be bought and sold. As a business owner, you are the CEO, Chief Executive Officer, of your company. You oversee and provide the direction of the business. You provide the guidance needed to continually grow and expand the business. You provide the leadership to the team ensure great customer service and ensure the right processes are in place to maximize sales and profits.
Some of you have a team of 1 or 20 and others will be the only one in the company. No matter what your situation, the role of the CEO is still there. You are the one responsible for all those items I mentioned earlier.
Since a business is a standalone entity, a successful one will have a positive cash flow. Here is where I’ll challenge you to look in the mirror.
IS YOUR BUSINESSES PROFITABLE?
Let’s pretend for a moment that you want to sell the business. However, the person that wants to buy the business already has a few businesses they run so they see yours as a great addition to their portfolio of businesses.
The first thing they will want to do is, is to look at your profit and loss and your balance sheet. They will want to look at what you own and what you owe. They will want to know how much money is the business making each year.
So you grab your p/l and excitedly show them you are clearing $60,000 a year. You have around $25,000 in equipment and $5,000 in debt. You feel your business is worth at least $100,000 but you prefer $150,000.
The buyer looks all this over and tells you the most they can offer you is $20,000 for your business. You think they are lowballing you. You are insulted. Did they not just hear that you make $60,000 a year! What the heck.
When you ask them why they are undervaluing your business so much, the buyer looks you in the eye and says, because that is all it is worth to me. You become even more offended. The buyer sees your agitation and growing anger and realizes he didn’t mean to offend you. He offers to explain why.
They buyer loves your business and really wants your client base. If you have a team, they might even like how well trained they are. After all, these are the reasons they wanted to purchase the business in the first place. But there is a problem.
The buyer asks you how much of the $60,000 did you take for a salary last year? They notice that you do not have a salary line on your P/L but they assume that you are paying yourself out of these funds.
You nod your head and then say, well the entire $60,000. That is what you should make each year as well.
But you see, here is where the problem comes in. If you are selling your business, the value is going to be based off what the TRUE net income is. If you are taking all of the profits of the business as your salary then it really isn’t making $60,000 is it?
If someone was to purchase your business and they had no intention on working the business like you are, the first thing they are going to have to do is hire, well….you. They are going to need hire someone to do the job that you were doing. They will need to hire a manager and or a worker bee to take over all the parts that you were doing. This would more than likely suck up any profits that you had. In some cases it might even run higher if you were doing the work of multiple people (now that doesn’t sound familiar does it?)
You see, a true businesses is one that is self contained, so unless your $60,000 in profit is after you pay yourself then you basically, you own your job.
A quicker way to tell if you have a job or a business is if the business shuts down when you need time off. If you have to shut the business down to take a weekend off or a vacation, you own your job. If your businesses is physically dependent on you doing the work, then you own a job.
YES YOU OWN A BUSINESS BUT….
Don’t get me wrong, you do own a business. The challenge many small business owners have is, they also own their job. For some of you that is ok. You are perfectly ok with only making money when you actually “do” something.
However, wouldn’t it be nice if you had a business that was making money even during the times you take off to spend with your family? That you could make money while on vacation? How cool would it be taking a 2 week trip and knowing your business is humming along just great? Most of us would love it!
Don’t get me wrong, I love hustling and creating but you know what, some day’s I’m tired and would love it if my business would keep going without my brain power. That I could physically unplug and the leads would keep moving along. My ultimate dream is to build that business that allows me to do this if I wanted. How about you?
Earlier I started this by episode talking about selling your business. While today you might not have any plans to sell, you need to keep in mind that day might come. You have no idea what your future holds. Unless you can talk someone into buying your “job”, you are going to be left with a business that is bought using your book value (what you own minus what you owe) plus any profit above paying folks for what you do. This is why the business in my example was only worth $20,000 to the buyer.
You might recall the business had $25,000 in assets and $5,000 in debt. So that is a net of $20,000 and since we already know that the owner would need replaced, there were no profits worth considering. So unless the owner could convince the buyer about the value of the customer base, then he would have a $20,000 true value to the buyer who had no plans to run the business themselves.
I personally ran into this when I wanted to sell my Baskin. Since I worked fulltime to help save payroll, all the potential buyers had no desire to work as often as I did. So in order to replace me as that worker bee, it was going to put the breakeven business into a hole they didn’t want to start in.
STOP LIVING PAYCHECK TO PAYCHECK
So, why did I do this episode today? As we head into the new year, I want each of you to take a look at your business. My goal has always been to help you increase your profits, boost your sales, improve your processes and develop stronger teams. The reason this is my primary goal is to help you take your business to much higher levels.
One level of that I want to help everyone get to is one that not only increases your take home pay, but one that produces profits above and beyond your take home salary. Once you get your business to that level, then you no longer own your job. You own a money making businesses that becomes worth something. Even if you don’t sell it, you will have a business that will take care of you and your family during times you can’t physically work.
This is also the time that allows you to expand the business if you want. It gives you options to open new locations or possibly franchise. You go from small time to big time.
This is when you hit that $100,000 profit mark and beyond. Here is where you will build your retirement. You will stop living paycheck to paycheck and create the future you have been wanting. You will not have to work until you are 75 years old unless you are still getting enjoyment out of it.
Let’s face it, some of you couldn’t physically keep doing your businesses if you got hurt or your body started to breakdown. What would happen to your family?
So even if you don’t want big time, that’s ok. Just plan on your exit plan if you were to get sick or retire.
A JOB VS A BUSINESS
Listen, almost all businesses start off as a paid job. That’s ok. It is the freedom we all craved. It was answering that entrepreneurial call we had. I just want to challenge each of you as you head into the coming year to have a plan on where you will be by the end of it. Challenge yourself to take the steps to get your business one more level than you are today. Do not repeat last year. Improve and grow.
And with that, I say we wrap up this puppy. I know you are planning on kicking some butt! This is why you are listening to podcasts. You want more! And I have no doubt you will! “
I realize being a local small business owner can be a lonely gig at times. But you don’t have to do it alone. Just know, I’m always here for you.
By the way, If you like what we are taking about, then make sure to subscribe to the podcast so you don’t miss an episode, if you love the podcast and what we are talking about, then please leave a 5 star review so other local small business owners know this is a podcast that they can’t miss.
And don’t forget to visit the website at LocalSmallBusinessCoach.com to leave your question for me to possibly answer on the podcast in the future. You can leave it via the Speakpipe button or just shoot me an email.
Meanwhile, I wish you the best in your business and remember: Great Customer Service, coupled with Great business practices will set you on the path to Great Profits!
Bye for now…..
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Have a Question You Want Asked on Air? Shoot Me Your Question
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HELPFUL LINKS
Podcast Website: LocalSmallBusinessCoach.com
Leave your Message on the website with the SpeakPipe Button or just email me at Tammy@LocalSmallBusinessCoach.com
Our Training Materials for Local Small Business Owners: TrainingforLocalSmallBusinessOwners.com
Starting a Local Small Business Website: StartALocalSmallBusiness.com
My Recommended Bookkeeping Program for Local Small Business Owners: Freshbooks Link
Why? Helps you invoice quicker and more importantly, get paid quicker. Let’s you know when your clients have opened the email and they even help send reminders. Clients / customers can pay right from their phone or computer. Give it a Try: Freshbooks
**Freshbooks is an affiliate link. This costs you nothing. I only recommend due to how much folks have loved it. I am paid a small commission but trust me. Even I use it. Try it for free for 30 days and see if you don’t love it too!
Today's episode, as well as all of our episodes, is brought to you by trainingforlocalsmallbusinessowners.com. Where we provide free tips, tools and resources for your local small business. So whether you are just starting out or you've been in business for a while and want to learn more ways to increase your profit, boost your sales, improve your processes and develop stronger teams then head on over once again to trainingforlocalsmallbusinessowners.com..
And if you are Thinking of Starting a Local Small business, over at StartALocalSmallBusiness.com we have lots of free tools and resources to help you get your local small business started. Plus, we now have a more in-depth course to Help Get you going. It has 12 modules, 50 mini videos and 13 downloadable tools a person can use to start their local small business. You can find the link once again at StartALocalSmallBusiness.com. I also have set up a special discount code for listeners of the podcast. At checkout, just add the code PODCAST to save 25%.
See you on the next episode!
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Two Great Books to Help You With Your Small Business:
Highly Recommend all Local Small Business Owners Read the eMyth by Micheal Gerber. You will learn some critical things about running your business.
The second book is one I wrote based off a popular example I always use when folks are trying to understand their role as a leader with their people. Check it out.
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