I see it all the time, people who have decided that they want to buy a business so they can ‘look good’. To some people owning a business is all about a certain status. They think that it portrays a certain image, whether that is authority, elitism, power, superiority, something that makes their ego happy.
Don’t get me wrong 99% of Small Business Owners are hardworking, dedicated people who work way longer than your average Joe and in only about 50% of those cases are they rewarded by having a successful Small Business.
But Owning a business is a responsibility, not a status. You don’t necessarily have to work 100 hours a week for it to be successful. You just need to understand business, work smart and do things that don’t put pressure on the business.
In the local town where I am located there are Small Businesses closing all the time. A lot of them are closing because of some of reasons I talked about in my blog, 6 Ways to Keep Your Business from Going Bankrupt. ATO Debt is a huge reason, but this can be avoided, have a read of my blog BAS Debt and How to Avoid it.
But some of them are closing purely because the business owner wasn’t prepared to put in the hard work, be smart about business or be willing to understand business. So let’s look at some of these.
You must be prepared to work IN the business
For years we have heard that you need to work “ON” your business and not “IN” it all the time, and this is true, but you still need to work IN it. You still need to be doing what you do (if that makes sense).
Let’s take a look at someone who owns a Bar/Bistro. For them to work ON the business, they should be looking at Profit and Loss statements, Balance Sheets, Wage Reports, COGS Reports. All the things that are going to help them understand what is going on in their business and to make better decisions.
But they still need to be one of the crew, pouring beers, running meals, cleaning, talking to customers, stocking the fridge and generally being one of the crew. This is working IN the business. The cost of wages is way too high in the Hospitality Industry, well many Industry’s really, for you, the business owner not to be on the floor working IN the business and keeping wage costs down, and keeping an eye on spoilage etc.
Then you have the times where you are working IN and ON the business at the same time, meeting with Sales Reps, bargaining deals, getting them to drop prices, and working out how much your prices need to be. Looking at what your clients like and how you can offer them special deals based on the deals you are getting from the Reps.
If you thought you could buy a Pub and just put someone in to run it, or to only be there part time, then you will be closed in the fastest possible time ever. Unless you are a company that has multiple successful venues, and you have the backing of some ‘big money’, then you must be the one doing the work, IN and ON the business.
Don’t take too much money from the business
I am not saying that you don’t deserve a wage or that you don’t deserve to be rewarded for your hard work, but what I see quite a bit, is that the money that the business earns sits in the bank and the owner can’t resist the new shoes, new jewellery, a ‘research’ holiday. All with that money, that should be used to pay bills, wages, loans.
When a business owner takes money from the business for personal use, depending on the business set up, it can be called Owners Drawings, Partners Disbursements or a few other things. What I have seen a few times is that the Owners Drawings for the year is way above what the business can afford.
Suppliers don’t get paid, the ATO doesn’t get paid all because the Owners believes that they have a right to the money in the business as it is their business. And once again, I am not saying that you don’t have a right to that money, all I am saying is that you only have a right to the money after your bills are paid and your staff are paid and the ATO is paid and any lending facility is paid. Only THEN should you take money from the business for Personal Drawings.
If your business is not doing too well and you need money to survive but if you take money from the business then suppliers/the ATO/staff wont get paid, then you really need to look at your business. Work ON it for a while and see what is going on. Read my two blogs I mentioned above and also read my blog, Why making a Profit doesn’t necessarily mean you are Cash Flow Positive.
Get a Business Mentor, ask me for help, talk to your Accountant. Do what you need to do to turn your business around so that you and your business can survive.
If you are a Business Owner, make sure you understand what that means. Being a Business Owner is not a status symbol. Owning a business should meet other needs, like fulfilment of a dream, helping others etc. etc.
If you would like to talk to me more about Business Mentoring, then send me an email to firstname.lastname@example.org.