What Kind Of Business Do You Want To Build?
One of the first decisions you need to make is what kind of business you want to build.
I don’t mean should I be a plumber or should I be a consultant? What I mean is are you clear about what you are doing this for and what you want? Before you go much further, it’s vital that you give some thought to the type of business that you want to run and what you want to build for yourself. Now, you may not know where you are going but in general terms UK start up businesses fall into two distinct types.
Do you want to build an INCOME business based around your lifestyle?
OR… Do you want to build up EQUITY in a business by creating something that has a value distinct from you?
Here’s a explanation:
Building An Income Or Lifestyle Business
- The business exists to provide you with an income and support your lifestyle
- You take as much income out of the business as you can from year to year
- It may be financed from your own resources or small loans
- It's a bit like a job but you work for yourself
- You tend to work regular hours to suit your life
- Your capacity is limited to the clients you can handle and they identify the business closely with you
- Apart from you the business has little value
- Most consultants, coaches, plumbers, driving instructors and other small businesses are this kind of income or lifestyle business
- Often, the business runs you Here you want to create a ‘job’ and work ‘in’ the business. When you go on holiday, the business stops.
Building An Equity Or Value Business
- You start this business with the aim of creating a brand, process, product or service that has real value separate from you
- You invest heavily in both time and energy to grow the business fast and plan to exit at a later date
- Your aim is to establish a management team to run the business so you can exit and realise the value at some stage
- Not a job. You are building a system that creates value
- It may be funded by external capital supported by a strong business plan
- The business or brand has real value apart from you
- These are the businesses that get the most publicity, created by people who seem to have been born entrepreneurial
- At the start it will be more than full time and intense
- Often, you can step back and the business runs without you
- Here you want to create a business system (not a job) and you work ‘on’ the business. (others work ‘in’ it). When you come back from holiday the business has grown
Why Is This Your 1st Decision?
I recommend that you decide soon because the energy required, the type of goals and the approach are very different, depending on which sort of business you want to run. Most small businesses are income or lifestyle based and this often suits the owner. If this is what you are building then you can get started more quickly, your overheads will be low and you will probably choose to work in loose or virtual alliances with other smaller businesses when you need to tackle the bigger jobs. If you have ambitions to build a business that has a value separate from you or perhaps dominate your market then you need to start thinking from the beginning about how to plan for growth, scale and developing a strong brand. It’s likely that you will be employing other people so you need to equip yourself with some good advice about how to do this properly.
Hugh Dunnet had heard stories of people offering to assemble flat pack furniture for customers. He decided to offer this service locally and was very clear that this was going to be a branded service spread across the South East. He started by persuading a couple of local DIY stores to carry his card and then when he had got a few recommendations started to open negotiations with IKEA. He had the steps thought through. His first employee was his Dad who had retired and who he trusted to provide great service. Very soon he had another van and a reliable colleague operating 20 miles away under his brand. He remains on course to add his tenth “man with a van” very soon. Asked about his success he said “I had a clear plan to change from having a business as a job to owning a business as soon as possible, I couldn’t have done it if I’d kept doing all the work myself. The other thing that helped was paying close attention to what my early customers really wanted and changing my service very quickly.”
