I’ve found that there are three basic functions that need to be regularly and continuously accomplished to be able to run a business:
- The entrepreneur needs the technical skills to do the work that people want done.
- The entrepreneur needs the desire and the passion to run a business.
- The entrepreneur needs the business skills to keep a business operating profitably.
When a business is started, it is assumed that it will be successful. Most entrepreneurs haven’t thought about whether or not they want to run a business for profit or run a business that is not for profit. It’s confusing, because both types of businesses need to make a profit. The difference is that they operate under different tax rules.
I’ve watched ex-employees start their own business and then watched them struggle with their new business. Some of them do not understand why they are working harder than they did as an employee for someone else, working longer hours than they did as an employee for someone else and making less money than they did as an employee working for someone else. What they finally realize is that a business takes more than the 40 hours a week. It takes an owner with skin in the game to run the business. The owner welcomes their new employees into work to do a job, helps get them organized for their work day and then hugs them good bye at the end of the day. The person with skin in the game, the owner, has to have the business prepared and re-prepared for their employees each and every day. The time before and after the employee work day is required to be put in by the owner. The owner’s efforts will allow employees the opportunity to work for 8 hours each day on a job or jobs.
A business is an entity that agrees to take a want, need or desire from a source and then fulfills the request that has been asked to them for a fee. I would like to use a pipe with a fixed diameter as an example of the environment that a business decides to work inside of. The business chooses the diameter of the pipe based on the types of jobs that it decides that it wants to do. The premise being that if the job “fits” inside of the pipe, it is the type of job that “fits” the company’s abilities. It then makes it much easier for the business to see whether or not the job “fits” the company. If the job does not “fit” inside the pipe, then the business knows that it is not the type of job that they have decided they want to do. So with the premise set for the business and the types of jobs they are going to do, let’s go to the first function that I talked about at the beginning of this discussion:
The new entrepreneur needs technical skills to do the work that people want done. The majority of people come into their new business with the ability to do the type of work that they want to do. They have usually been working in the industry already and they’re usually proficient at their job. They are usually feeling that they can do it faster and better than other people around them. They are also feeling that the money being charged for their services could be charged by them and that would allow them to make more money than they are currently earning as an employee. A minority of people starting a business lack the necessary technical skills to complete the needed work. As a result, they have to hire people to do part or all of the needed work. They are at a greater disadvantage in the new business due to needing more cash to start the business with.
The individual that can do the technical work has the advantage over one that cannot do the work. By being able to do the work themselves, they are always guaranteed a job as long as there is work to be done. The drawback to this edge is that they can get too involved in the work and therefore not pay attention to the rest of the functions that need to occur in a business. Said another way, the skilled person is sometimes overly confident in their abilities and, as a result, does not pay attention to other things that need to be done. The non-skilled person will be paying more attention to the situation and what is going on, because they know that they do not know as much as they need to know technically.
No. 2, the entrepreneur needs the desire and the passion to run a business. For those of you that have started your own business, remember the wonderful feeling of pride that you had when you got going? It is a very powerful feeling and there is nothing like it. Have you begun to notice that it is not as much fun as it used to be to own your own business? Remember how you used to spend hours talking and dreaming about how you thought the business was going to go? Remember how great you felt when you bought a piece of equipment for the business?
Remember the pride you felt when you and your business were recognized as being a part of your local community? As you’ve noticed, those feelings begin to decrease as the business gets older and becomes more difficult to function in. Like it or not, people around you can feel that desire and passion that you carry around for your business. They want to be around a winner, they want to be a part of a company that is going places. They really want to know what is in it for them and then they like to receive rewards for their hard efforts, just the way that you used to feel! It’s like a hometown team losing to a non-local team, you can feel, see and hear the disappointment and the loss of pride in the loss. The entrepreneur started with that great feeling and they need to perpetuate that feeling in order for the company to move ahead.
Moving on to No. 3, the entrepreneur needs the business skills to keep a business operating. This is the toughest function for all businesses to make happen. The reason is that most people have not had the opportunity to be taught and then trained how to run a business. A small business is defined by the IRS as doing a volume of under $100,000,000. The U.S. government says that 80% of the economy is made up of small businesses. Rutgers University did a survey a few years back and determined that 65% of all businesses failed within their first five years of operation. When businesses fail, it’s usually not because of lack of business, they fail because they run out of cash. Most businesses learn what they need to know by reacting to opportunities that occur as they are trying to grow their business. A lot of entrepreneurs are arrogant and feel that they will be in the 35% that succeeds. Unfortunately, they believe this in their minds without benefit of actual knowledge of the facts.
The other piece of the puzzle is that the 65% that fail do not come back and tell the 35% why they failed. A lot of entrepreneurs feel that they can smell failure and they run away from anyone that they sense is in danger of failing. Formal education is a possibility for some people, but certainly not all of the people that want to go into business. The fact is that most business instructors have not run a successful small business for themselves. As a result, a lot of entrepreneurs believe that they only way that they can learn to run their business is through real life experience. If this sounds like a circular logic problem, you’re absolutely right! A good place to get help is to do what you are currently doing - reading trade magazines, attending trade shows, sharing experiences with other non-competitors that are in the same business that you are in.
So which do you want to do, run a business or run a job?