What Type of Business Are You Running?
1. Non-Profit—Lots of time, spiritually rewarding, little compensation
2. Hobby—Lots of time, intellectually rewarding, little to no compensation
3. Retirement Side Business—Some time, intellectually stimulating, modest compensation
4. Lifestyle—Time-consuming, intellectually exhausting, reasonable compensation
5. Service Support—Scheduled time, intellectually and spiritually stimulating, good compensation
6. Growth Oriented—All time-consuming, exhausting and stimulating, future compensation oriented
7. Mature Business—Time-consuming, frustrating much of the time, good compensation today and tomorrow
There are thousands of non-profit companies. Often, pay for the leader and the employees is well below norms, or they are providing support to the non-profit for free. Many board members of non-profits are looking to use the free support to be able to connect with others that will then provide them a better job or access to more lucrative positions. A person starting or running a non-profit may not be interested in making money. Rather, they are interested in advancing the mission of the organization and are willing to spend time and effort in support of that mission.
This is a business being run for fun rather than for profit. It might be someone trading in baseball memorabilia for instance. The purpose of this type of business is to spend time doing something you love while you have other sources of income. The business may lose a bit of money, break even, or make a small profit. Sometimes, such a business can turn into something more. More often, it ends when the owner is no longer able to work the business due to health or death.
This type of business can also be one where the owner has the unrealistic expectation of growing the business. They are running the business with insufficient income to even give themselves a salary or take draws from the company. They are often getting funds from a partner that is working full time, death benefits from a spouse, military pensions, or divorce settlements.
3. Retirement Side Business
So many people reach retirement age or are forced out of the work world due to being displaced, replaced, injury, or medical issues. Maybe they have a small pension from a company, but this income source is disappearing for succeeding generations. Perhaps they had a 401K, but did not provide enough money into it while working. Perhaps they relied on Social Security providing sufficient income for them. Some people fall into this when they get hired back by their previous employer when they retire. They become a full time or part time contractor of a single person LLC. The purpose is to augment their income from other sources to make ends meet, or to provide additional funds for fun and travel.
This is a stable business providing its owner, and possibly his/her family, with sufficient income to cover day to day expenses. Maybe it allows some money to be put aside in investments. Many times it’s owner is counting on the eventual sale of the business to provide the majority of money needed in retirement. Frequently such owners find out very late that their business is not worth as much as they thought. The result is they end up working much longer than desired, or end up trying to find a Retirement Side Business to support themselves.
5. Service Support
There are many businesses that can be done by a single person hiring out as a contractor or consultant. This is the growing contingent workforce. Software programmers, marketing consultants, sales coaches, bookkeepers are in this category. Some lawyers, accountants, CPAs, insurance salespeople are in this category. Many people become real estate professionals for a period of time in their career working on their own, or as a subcontractor to a real estate firm.
6. Growth Oriented
This category includes the many startups looking to change the world and/or get rich quickly. Quickly may take 5-15 years when you review the information on startups and when they sell. The sale of the company is often a large multiple of earnings, or, better yet, a multiple of sales. This is the American Dream type of company. In fact, it’s a dream for people all over the world. The likes of Steve Jobs, Elon Musk, Jeff Bezos, Mark Zuckerberg and more have replaced the industrial titans of Ford, Westinghouse, Edison, and the others of a century ago. Incubators, pitch-fests, angel funds, private equity funds, and venture capitalists are the homes and supports of these potentially high-profile companies.
The Dow Jones 30 Industrials, the Fortune 100, maybe even the Fortune 500 are in this category. These are companies that have been around for a couple of decades and measure their success in terms of Total Shareholder Return (TSR). They provide a steady dividend with some upside potential in share price. Growth is still an imperative for them, as the stock price is driven by their plans for and demonstration of growth that is at least slightly better than the economy. Often they focus on growth in profits, especially during a turn-around, before they focus on growth in sales or market share. Often their growth is fueled by buying another mature business or a growth oriented company as their business transforms.
I’ve seen all of these types of business in my work as a Business Accelerant™. All are affected by the 7 Forces. Some will benefit from the 8 Builders of Value. All need some sort of GAME plan and an end-game strategy. For instance, I talked with the founder of a successful 501C6 non-profit that has let the board know they should plan on finding a new leader in 5 years when the leader plans to cut back. Spouses often are left with the job of closing down a hobby business of their partner.
What type of business are you running or working in? What’s the mission and vision of the company? How does the GAME plan support them? What’s the end-GAME strategy?