Most of us probably know people who were very good at their craft, decided to go into business for themselves, and failed miserably. It’s a fairly common scenario. A person who is skilled at a trade decides that he or she can make more money owning their own business than they can working for someone else. Before long, it’s all they can think about, until one day they take the plunge and hang out a shingle with their name on it.
Owning a business continues to be part of the American dream for many people. For many years, this was a path towards wealth, and it is still possible to do very well financially as a small business owner. For others, the lure of owning a small business was freedom. People see owning a small business as a way to escape their 9-5 job. Others have a new concept for a product or service that they want to introduce to the public, and owning their own company seems to be the best way to do that.
Unfortunately, the American dream can turn into a nightmare. Eight out of ten small businesses fail within the first 18 months. While there are many reasons such a high rate of failure occurs, one of the underlying reasons behind many of these failures is that the owner was a technician, not an entrepreneur. He or she may have been an excellent tech but knew nothing about starting and operating his or her own business. In fact, for some, being an excellent technician can be a huge liability to a new business owner.
When a small business owner has the technical skills the business needs, he or she is apt to spend a lot of time working in the business rather than working on the business. You may be an excellent plumber, but if you spend all your time fixing pipes when do you develop a marketing plan to grow your business? When do you do the required bookkeeping? How do you find time to send out your invoices and follow up on those who don’t pay on time? How much time do you have to interview potential new hires? The list of questions goes on and on. Soon you can’t keep up, and that 9-5 job begins looking pretty good. It was a lot better than the 8-midnight you’re working now.
A few years ago I knew a lady who was an excellent cook and baker. Everyone kept telling her she needed to open a restaurant. One day, she took the plunge and opened a small place where she sold light meals and baked items. She worked hard and felt like she was making good money doing something she enjoyed. When tax season rolled around her accountant pointed out that she should have been paying quarterly taxes on her profits. She also didn’t know about the self-employment taxes she needed to pay. She had never done a profit and loss statement so she didn’t really know if she was making a profit or not (she wasn’t). To say she became discouraged would be an understatement.
I loaned her my copy of The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael Gerber. The book focuses on the problem technicians have when trying to start and operate their own business. Gerber takes the reader through the various steps of running a small business. This best seller has been a huge benefit to the technician struggling to run their own business. It has also convinced some that they did not have the skills and/or the passion it required to successfully own a small business. My friend realized she was in that category. After reading the book she closed her restaurant and returned to working for another company.
There’s a lot more to owning a small business than leasing a building and putting up a sign. It can be very rewarding, but it is also very challenging. Before you take the plunge from being a skilled tech to a small business owner, be sure you know what you are getting into and that you have the drive and passion to succeed.