Last week we talked about you, your people and how you learn; if you missed it, you can find it here.
This week I want to talk about business, specifically your business, how it works and if it works over the long term.
The US is the land of opportunity right. Thousands of new businesses are started every year, and you may have heard that more than 80% of those businesses close within a year. So, if you are still in business, congratulations, you are in the top 20% of all business owners.
But is your business built to last?
Well, let’s think about how most businesses get started. How did you start your business?
You had an idea, you had a skill, you saw a need and figured out how to fill it, does this sound like your story? When I think about the hundreds of spray foam contractors that I have worked with over the years, most of their stories start out this way.
Either they wanted spray foam in their own house, and there were no local contractors, so they bought equipment, learned how to spray foam, and POOF, they were in business, or a long-time employee of a spray foam business decided to strike it out on their own and get into business for themselves; there are others, but these are the two most common stories.
John started his spray foam business just like this, he had a few years of experience spraying foam, then as operations manager running three crews and decided he could do it himself. He needed money, so he partnered with his family, his dad and his uncle fronted the money to help him get started.
John started out by selling the jobs and spraying them himself, with one helper. When he wasn’t spraying, he was selling, when he wasn’t selling, he was paying the bills, ordering material, fixing equipment, and John quickly realized that he was stuck. He did not have a business, he had another job, that required more hours, more time, and more effort, but how did that happen?
John was the skill worker, he knew how to do it and did it his way, but knowing how to do it, and running a business that does it, are two different things.
The business John started because he wanted more freedom, more control, more time, has given them none of that. He is a slave to the company, if he slows down, so does the business, if he takes a vacation, so does the business. John has not created a business built to last, because if he is no longer available, the business will wither and die.
This means the business has no value without him, so he cannot sell the business, all he could do is sell the assets of the business, like the equipment, for fair market value.
How could John get a different result?
What if John built a business that was an asset?
What if this asset produced income with or without John?
Wouldn’t it be worth money? At that point John could choose to work for the business as an employee whenever he wanted to or he could sell the business, and its income stream, to someone else.
Your business should create value and produce profits for your shareholders no matter who is in charge, who sells the jobs or who sprays the foam. This is how big businesses are built and run, and you can build the same machine.
Tune in next week and we will look at how you can build a business that lasts.
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