One answer to the question of ‘Why build a business?’ is for value creation, especially capital. The shareholder added to my title emphasises that I can call myself what I like. It is meaningless. Ownership delivers value, not titles.
Once upon a time, I was just an employee in an international business. I achieved a grand title and it felt great. I thought they loved me. Then the business was reshuffled and I was made redundant. Not warned or offered a deal; just told the news and escorted off the premises.
Try doing that to a significant shareholder and it is a different game.
Ultimately, do not be only an employee. Be a sole trader or a share owner in a company. Capital comes from ownership, unless you get to very senior employed levels. Start as employed if you like, but treat it as a learning experience.
Own your client bank
If you join an established firm, make sure you own your client bank. I lost mine twice before I learned this lesson.
Don’t assume your business will acquire value because it provides you with an income. Lock in the value so it works when you are no longer around. You will be dis-appointed by its real value otherwise. All purchasers know that, in many cases when an owner goes, so too does the business.
You should always have a business plan and know what you are setting out to do. Be realistic but ambitious –have some vision.
Always be flexible; plans must adapt to the times. Did anyone factor in a pandemic? Probably not, but I bet firms that had some sort of plan are surviving better than those without. And knowing what you want to achieve is the best way to make it happen.
Get studying
Get academic. If you do not know how to build a proper business, study. When we set out to build and sell a wealth business, one of us did an MBA degree and another an intense Harvard business course. It brought the benefit of current academic knowledge to the boardroom table. If you do not know about SWOT, PESTLE, LongPest or Porters, BCG’s Dogs, Stars and Cash Cows, find out. There is value in doing so; not everything is instinctive.
Pay yourself very well, but only when you can. You will be working harder and stand to lose the most. There will be times when the money is tight and you will have to cut your pay – even invest – to keep your business going, so compensate yourself when you can.
Do it all by yourself, fine, but being part of a team also works.
Mergers can be a great shortcut. You share the value, but the pot is bigger.
