'You should love your business, but aim for independence from it'
The passion to create something for yourself can consume all your time and money.
THINK BACK TO before we had that idea, when we were working somewhere else and adding value for someone else. What were the main reasons we wanted to take that jump and start or run a business?
I’m a second-generation entrepreneur, if there’s such a thing. I decided to take over my family business 13 years ago. I initially ran it with my father before assuming the MD role and taking the business in a new direction.
This was a choice, just like starting a business from scratch is. And when we make a choice like this, I contend it’s for two reasons.
The first, as author Simon Sinek propounds, is that we have a great idea and can’t sleep for the desire to convert that into reality and get someone to ultimately buy the idea.
The other, and my central theme here, is to create something of value for you and your family, to give you the financial wherewithal to live every day as if it was your last. This is serious stuff!
The first ‘why’, Sinek’s why, is like a drug. We love our idea and want it to develop and improve more and more each day. The side effects are notable though. We jump on a conveyor belt of development, strategising, early mornings, late nights, management meetings, staff meetings and conference calls.
Our burning idea leads to immense satisfaction from time to time, but panic attacks if things aren’t going as planned or the business isn’t growing fast enough. This is only practical in the long run if there’s a more basic driver to keep us sane.
The other ‘why’ has its roots firmly in the non-business world. It sits in the world of life, family life and balance. This reason for starting a business is basic and easy to understand but particularly difficult for entrepreneurs to practice.
Business owners can become very consumed with their product, service, staff and growth plans, so much so that there is very little mental energy left to remember why they went down this road in the first place.
City Life's Eamon Dwyer
Take a step back. Here I suggest three areas to focus on that I practice in my own business life:
1. Love your business, but aim for independence from it
Many business owners plough all their time and money into their business. This, of course, is one of the central definitions of the entrepreneur. However, this initial drive can often persist throughout the lifetime of that business as it, hopefully, succeeds and grows. It will suck in money for as long as we let it.
I encourage all business owners to both pay themselves properly and draw money out via a pension fund and other means. The recent financial crisis saw the collapse of many over-leveraged businesses, leaving many not-so-young entrepreneurs with little or nothing to show for their life’s work.
2. Diversify and spread the risk
This can be done in many ways. Two businesses instead of one, doing different things, or having many product or service lines in your business. However, many products, businesses and service lines are quite correlated, even if we don’t realise it.
Perhaps a better idea to give you some security is to take some of your profits and siphon money away towards different assets altogether. Even better, build it in as a cost of your business and take a percentage of turnover.
Building a portfolio of assets such as commodities, bonds and property that are less connected to your local economy or sector makes sense. To do so however requires taking advice on board and following a disciplined path.
3. Don’t be a forced seller
Exiting from your business once you start thinking about hanging up the boots shouldn’t always require selling that business, or your shareholding in that business, if you plan it right. Sometimes you can’t sell it due to the economy or debt issues, and in Ireland, many people simply don’t want to.
I’m a prime example – I took over my father’s business. For this to happen, he needed to be financially independent of the business, as I, fresh out of college, certainly wasn’t going to pay him full value for it! The same thing might apply to you and your children or other relative at some stage. Give yourself the option to sell your business, but don’t be forced to – and the suggestions above should help you do this.
Eamon Dwyer is the managing director of City Life.
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