The essence of a successful business is really quite simple. It is your ability to offer a product or service that people will pay for at a price sufficiently above your costs, ideally three or four or five times your cost, thereby giving you a profit that enables you to buy and to offer more products and services.
In order to know why a business is successful – or why it fails – we need to know what exactly a business is.
We all know what a job is.
The common notion, especially in those economies where small businesses rule, is that ownership of a small business is like having a job and being the boss at the same time.
It’s easy to find advertisements along the lines of “say goodbye to the boss - buy your own business”. But many, if not most, of these so-called businesses are merely jobs, substituting one boss for another.
They certainly don’t meet the SIMPLE criteria for being a business.
So what is the real difference between a job and a business?
With a job, if we are not on the job, we are not being paid. We have to put aside the obvious anomaly that in some jobs we can be on the job – not working - and still being paid !
But, in general terms, a job means going to work, and getting paid for it.
How does this differ from a business - a real business ?
The fundamental difference is that a real business – one where the systems are set up and operational, with staff and management in place, will continue to function, and earn for us, even when we are not there.
Obviously it will not do that forever without supervision. Every business needs guidance, strategy, supervision, governance and leadership.
But in general terms a business will earn for us when we are not there – whereas a job will not.
Often a real business can also be bought and sold. It is difficult to find many jobs that can be traded.
So where does the confusion arise as to exactly what a business – as opposed to a job – is?
And why does it matter?
Very often confusion arises from the concept of control. There is belief that because I own the enterprise, and I am the boss – then it is a business.
Whether I mow lawns or fill holes in teeth or even perform brain surgery, the key question which should be asked is: “Am I earning, when I am staying in a tropical paradise, lounging on a beach, sipping a Pina Colada?”
If the answer is No, then I don’t have a business. I have a job, with myself as boss. Very possibly I also have a bank manager as a second boss – which I will address a little later on.
If however, I have a team of dentists filling teeth as I sip my Pina Colada, or a team of garden boys clipping hedges and lawns, then I have a business. Instead of the bank balance being depleted every time I travel to an exotic locale on vacation, my business is at very least going some way towards paying for those overpriced colorful drinks with little umbrellas.
So what does it matter whether it’s a business we are working in, or a job we have bought ourselves?
To most people it doesn’t matter at all. In fact, to many people the concept of a business is exactly what they don’t want!
They want to be able to moan about their boss - which isn’t so easy when you are your own boss. They want to be able to walk out the door at 5pm and forget all about the job until the next time they walk back in. They want to go on holiday, forget all about the job, and be paid for the 3 or 4 or 5 weeks they are away with no thoughts whatsoever about the business.
If, however, you want challenge, and you want opportunity, and for whatever perverse reason you want to be able to submerge yourself in creating a real business – where you live, breath and stress about it 24/7, then it does matter that you are in business rather than in a job.
Because a true business can be scaled – which a job can’t. A true business can be bought and sold. And a true business can create ongoing wealth – which very few jobs can.
The SIMPLE reminders to ensure you stay on track to build a business rather than a job, is to ask every time you make a management decision, “Does this help build a business, or trap me in a job?“