One of the greatest sources of fulfillment that I have working on my own in accounting is being a genuine help to budding entrepreneurs. I say budding entrepreneurs because not all self-employed people are true business owners, and not all business owners are entrepreneurs. A person with accounting and bookkeeping skills may start a practice on her own, and then that same person may show a little hustle and start hiring employees. Once it’s profitable, she can call it a business, but a businesswoman doesn’t call herself an entrepreneur until that business can operate on its own without her physical presence. This kind of enterprise gives the owner options—to sell, to hand the business down to her children, or to work in semi-retirement until it’s time to call it quits.
How do you start a successful business that gives you these options? Whether you always dreamed of starting your own business or happened into it through events and circumstances, building a business that gives you options requires deliberate planning for value creation. This begins with an exit strategy, a vision that you strive to fulfill.
BUILD IT TO SELL
As the late Stephen R. Covey said, “Start with the end in mind.” Most people who start a business hope to sell it for enough money to retire comfortably. So when we talk about vision, we’re considering a couple of aspects. One is an operational vision—when you look at yourself coming in to work, what do you see? Do you see a store or an office? Are the employees behind desks, or are they behind a counter serving customers? Is the establishment busy with activity, the phone ringing with customer orders, trucks being loaded with product, or the conference room filled with clients?The other aspect is the final goal: What will it look like when you leave the business? Will there be a sense of accomplishment? Will there be money in the bank for a quiet retirement? Will there be options to start another business or contribute to society in other ways?
TECHNICIAN TO ENTREPRENEUR
When starting a business, you as an individual travel a path from technician to businessperson to entrepreneur. Meanwhile, the business runs the parallel course from practice to business to enterprise. You need to work on a process of self-development and growth as you transition the practice into a business. But this process of personal development can be challenging. If you want to develop your work into a business, you need to develop a new mind-set as an entrepreneur.
Technicians have technical knowledge of their trade, and people are willing to pay for their expertise. They do everything themselves. But in order to maintain enough work to make a living, they often take on any customer that comes their way and expand into services that the customer may want but that aren’t in the technician’s primary area of expertise. The work directs what the technician does. This may work out for a while, but it isn’t a business—it’s a job. To break free from this merry-go-round, the individual must work on the business, not for it.
When we think about the possibility of selling a business someday, what are the characteristics of a business that a potential buyer would be interested in buying? Some excellent resources on the subject include Built to Sell by John Warrillow, The E-Myth by Michael Gerber, and Optimize for Growth by Jonathan Smith. The common theme? A business that will sell needs to have a history of making a profit with the 5 S’s: system, specialize, subscription-based cash flow, scale, and story. These apply whether you’re selling products or services.
System. Optimize your business by implementing a system of processes and controls to give traction to your vision and to develop a healthy team. You need a system and written procedure for everything, from how to answer the phone to the technical aspects for sales, marketing, hiring, etc. Don’t run the business around the people you employ. Instead, hire people to fit the systems and procedures that operate the business. The system comes first, which makes “getting the right people on the bus” a simpler process and helps ensure consistent delivery of sales and service.
Specialize. When I first started out providing accounting services on my own, I did two things in order to keep an inflow of business that most first-time business owners find themselves doing. First, I took on all customers. Second, I did a variety of work for those customers that fell outside my core expertise. I ultimately needed to take control of the scope of services, only taking on the type of customers I am willing to work with and providing them services that fall within my areas of expertise.
Subscription-based cash flow. You can charge your customer in part or in full before you experience the costs of providing services. I’ve experienced firsthand uncollectible receivables that I could have avoided if I had established a deposit or subscription-based rate up front instead of completing a job before receiving a dime. Now, at the very least, I require payment on receipt.
Scale. To create a business you can eventually sell, your product or service needs to be scalable. In other words:
- It’s valuable: It’s a product or service that people need and are willing to pay good money for.
- It’s repeatable: It’s something that people are willing to buy over and over again.
- It can be delivered through technology: It’s teachable to others without a need for your presence.
Story. You can attach your own story. It’s so easily marketable that a product salesperson can sell it. Control the script that your sales force and employees use when they converse with customers. Make sure your website, your Facebook page, your Twitter feeds, and your 30-second elevator speech are telling the same story about the business you are building.
The ideal business will move toward a place where it can thrive on its own. Building this sort of business is what elevates the businessperson to an entrepreneur.