You’re in business to make money and enjoy yourself – right? Well, quite often it gets to be a chore – and a common source of dissatisfaction is in having grown into (or fallen into) the wrong business model!
The “Four Ways of Business”
There are four main “purposes” or ways of being in business:
- A hobby business
- Build (or buy) yourself a job
- Lifestyle
- Growth business
Each is equally valid – depending on YOUR goals. Many business owners actually end up by default in #2 – but what they really want is #4.
The result – frustration and often poor performance.
Features of the “ways”
Hobby business
This is always a secondary income and relies on an outside income to support the business owner. The hobby business will usually be in the form of a sole trader, it may or may not be GST registered and is often an owner-operator without staff. Everybody in a job should have a hobby business!
Build or buy yourself a job
Often the choice of people made redundant from management positions. More often grown into as a small business which gets bigger and bigger. Tradespeople often find they have somehow built a big business. It just grew from one man and a van to 40 staff and a fleet of vans and a big workshop and warehouse operation. Suddenly the owner is a slave to the business! They are still thinking “job” when they should be thinking “business”.
The structure is either sole trader, partnership or limited company, and funding is often secured against personal property.
Lifestyle
In the case of a “lifestyle” business, the “work” is a big attraction and key motivator. People involved in art, music, sports, health, or specialist services often build a business of this type. Frequently the business operates regardless of income levels. The concept is: “I’d still be doing it even if I wasn’t being paid”.
Long term connection with the activity is usually the goal. The structure may include options such as co-operatives and trusts. Funding is very hard to obtain – after all, would YOU fund someone else’s lifestyle?
Growth business
This model is the one that fits a key definition of business: “A true business must be capable of running without the owner”. It is the only one that will set the owner free. The owner has to plan an “exit policy” from the very start of business: That is, you plan to work your way OUT of the business. An emotional commitment to “letting go” is absolutely vital for a successful transition to a growth business.
The structure is normally a limited liability company and funding is obtained by production of a good business plan backed by solid sales records and preferably some solid IP.
The advisor’s role
We often work with owners to help them remodel their business to the growth-business model. Or to be clear about their motivations and become happy with another model – realising that they’ll have to give up some goals to achieve others.
This does require outside input. Usually, the owner is so used to “doing everything” and being the “guru” that they are unable to get their head around the changing role needed.
The delegation, succession planning, reporting structures, who does what, performance, accountability – it all needs input and planning and especially an independent sounding board for ideas. Often helping staff understand the changes needed is a key part of our role.
All our programmes are registered with NZTE’s capability voucher scheme so you may be eligible for financial support in taking action!
By Trevor Clark