Are You a Better Entrepreneur or Employee?
A tragic statistic tells us that many businesses that are passed on to children or that are purchased by employees fail. Why? The reason is simple. There is a huge difference between the mindset of an employee and an entrepreneur. Before you buy a business or before you as an owner agree to sell a business to an employee or pass it on to your children, it is important that you know those differences.
The reason is that you probably want your business to live on after you are no longer running it. That is why you often have an exit plan or a transition plan when selling a business. At the same time, it is fairly common for the seller to carry some of the financing when the business is sold one of these two ways. If the buyer were to default, you could lose a great deal of money too.
So what do you do? If you are looking to buy a business, ask yourself if you have some of the following traits. If you are selling a business, look at these things when you are trying to evaluate a qualified buyer.
Do You Like a High Level of Responsibility?
As an entrepreneur, you are responsible for all decisions around your business, good or bad. When things go well, or when they go poorly, people will look at you. When you are ready to buy a business, you need to be ready for that responsibility. When you sell a business, you need to look for this level of commitment in your buyer.
You Need Long and Short Term Vision
Similar to being farsighted or nearsighted, a business owner must be able to see well both in the future and in the right now. Short term goals are just as important as long term ones, and being flexible is key. Employees often do not need this kind of vision, and those who don’t have it will struggle with business decisions. If your buyer does not have these, and you see it early on, they might not be the best buyer for your business.
Remember, it is the ability to see things differently that sets an entrepreneur apart from an employee. Just because someone is a good landscaper does not mean they will be good at owning a landscape business.
Getting out of Your Comfort Zone Needs to be Comfortable
Being uncomfortable is often part of being an entrepreneur. Not everything goes perfectly when it comes to finances, employees, customers, and business overall. You will need to be not only comfortable with being uncomfortable, but you will almost need to thrive on it. If you are going to buy a business, this may be the new normal for you for a while. If you are selling your business, make sure your buyer knows what they are getting into.
Learning is Constant
If you know everything there is to know about business, being an entrepreneur is not the job for you. You will learn new things almost daily, and as soon as you think you have things figured out, they will change. If you like a steady position where you don’t have to learn anything new, being an employee may suit you better than owning your own business.
If as a business owner, your employee wants to buy your business but is resistant to learning and change, that should be a red flag to you.
The Truth is in Numbers
There is a lot more to numbers than just what is coming in and going out when you are a business owner. Numbers can make or break your business. Even if you are not an accountant, you need to understand what they are talking about in terms like cash flow and profit and loss. If you hate numbers, and never really want to get that deep into them, owning your own business may be tough. If you are selling to a family member or employee, be sure they understand the importance of this distinction.
Be Lovingly Objective
Yes, you should love what you do. But you also must be careful not to just be working your position as the owner of the business. You need to be working on your business, developing and growing it rather than just doing your job. If you can’t separate the love of what you do from what it takes to make it profitable, running a business will be nearly impossible. If you are selling a business, be sure your buyer has the mindset that profit and working on the business come before loving what you do every time.
Break the Rules Carefully
The greatest businesses of all time are the ones who have broken the rules consistently. But they also do so carefully, knowing that stepping too far outside the boundaries in some areas will create problems rather than solving them. This is a delicate balance, and one it is essential for business owners to understand, Whether you are buying or selling a business, it is important that you understand them too.
Start Thinking About This Now
Making the transition from an employee to a business owner and entrepreneur is a tricky one, and takes time. If you want to buy and run your own business, start thinking about this now. And when you are ready, contact us to see what businesses we have for sale, and how we can connect you with the right one.
If you plan to sell your business to a family member or an employee in a management buyout, start grooming them now. When you are ready, contact us here to talk about business valuation and the best way to organize the financing and sale of your business. We are here to help.