According to a study of over 1,700 business owners, there are three major reasons successful people started a business. One is the freedom to pursue new opportunities; two is a following personal passion, and three is to gain independence. Money only ranked in the fourth position. In other words, freedom, meaning, and independence are the greater motivations for successful business owners than money.
Yet, most people who start a business are quick to forget why they started the business in the first place. In the course of chasing after their dream, they lose their freedom, core purpose, and independence, and end up creating a job for themselves. In other words, they settle as self employees instead of business owners. To reclaim your initial purpose of starting a business – whether it’s freedom, meaning, or independence – you must embark on the toughest and most important task of the self-employed. Before we dive into it, be sure to subscribe to After School TV for more insightful videos like this.
Self Employed Vs Business Owner
A self-employed person is simply someone that created a job for himself. She trades her time for money. If your venture depends largely on your effort and presence to function and continue generating revenue – as a freelance or professional service – you are self employed.
A business, on the other hand, is simply a system or a combination of systems that generates income whether the owner is present or not. You are a business owner when your own a functional system of human capital, technology tools and other resources for the purpose of delivering commercial value.
Now, there is nothing wrong with being self employed if that is what you want. In fact, most people start out as self employed. You fill in the role of the entrepreneur, accountant, financial manager, marketer and customer relation, all at the same time. But if you want freedom, meaning and independence, you cannot afford to remain self employed.
Why You Should Transition to Business Owner
I’ve experienced the frustration of getting to that point when you feel stuck as a self employed person. You realize that what got you here can no longer get you there. In your quest for freedom, purpose and independence, you have ended up creating a job for yourself that demands more from you than a regular job would. This isn’t the best place you want to be.
Apart from that, staying self employed is risky. You’ve read stories of movie actors in desperate situations due to health issues. Footballers have gone bankrupt due to an injury that terminated their career untimely. And regular self employed people experience intermittent seasons of lack and plenty. If you really think about it, while being self employed may seem like the right option to keep more of the profit – and building a business may seem riskier – in the long run, it’s riskier to remain self employed. This is why you have to make it your priority to transition from self employed to the business owner.
How to Move from Self Employed to Business Owner
The keyword here is systems. It is the difference between working in your business and working on your business. In other words, you want your venture to be systems-dependent, not expert-dependent. Here are three things that will help you through this process.
Business Education
In his book E-Myth Revisited, Michael Gerber wrote about the general misconception that being a skillful professional or having a good idea qualifies you to build a successful business. He stated that the reality is often that people who start businesses are usually not the best people to grow it into a successful business.
The reason is that the skill required to build a system that is required to make a business successful is entirely different from the skill of being a self employed professional or even an accomplished employee. The lack of understanding of this difference, according to Gerber, is the reason for 80% failure in business in the first five years.
This is why you should dedicate yourself to educating yourself in business. You don’t need to go to school to study business administration. In fact, you don’t have to. Start with reading business books and taking online courses. Then use your self employment to experiment with what you are learning.
Delegate
Over the weekend, I was on the phone with a long time friend from school days. He is a smart guy, works with an oil company and runs multiple businesses in the ICT sector. He also has a passion for music, is working on his album; and owns a media and entertainment business. But he had a worrying concern; he does most of the important tasks for all his ventures. He puts in so much of his time and effort that none of his ventures could survive without him. And worst of all, he is not achieving his desired results. It turned out that what he actually has is a series of self employment in addition to his regular job.
As business owners, when you are focused on keeping most of the profit to yourself, you end up losing more. You lose from not growing beyond a certain financial level and you also lose by giving up your freedom, pursuing your actual passion, and independence. You may have started your business all by yourself, to the point of making some money. If you really want to live up to your purpose of starting a business, you must bring other people along. Delegating is one of your most important responsibility you need to transition from self employed to business owner.. Hire people who can do different tasks better than you can, and only focus on doing the few things that are your core strengths and that matter most for the growth of your business.
Leverage
When you hire and delegate responsibility to skilled workers you are leveraging human capital to build a system around your business. However, with technological advancement, you can hire fewer people today and get more done than a business of 50 years ago. For example, you can automate your marketing processes and get a continuous inflow of customers to your business without having to hire an entire marketing team. You can automate your accounting process with technology and keep a clean record of your cash flow and financial activities.
One of my businesses has three full-time employees, 5 freelance workers, and a system of technology that has been running for several years now with little input from me. That is the power of leverage. Look for ways to integrate technology into your workflow to automate your processes. This will make it easier to manage your business and free up time to explore other opportunities.
Separate Yourself from Your Business
I’ll also borrow from E-Myth revisited to explain this. A business has stages of development just like a human being. In this case, there are three stages.
The first is the infancy stage when the owner and the businesses are one and the same. You have a near romantic relationship with your business at this stage. The owner does all the work, to the point that it becomes too much to handle.
When he decides to hire people to help, the business has entered stage two; that is its adolescent phase. Adolescence also starts out great, as the owner doesn’t have to do everything anymore. But most adolescent business owners enjoy freedom too much and manage by abdication instead of managing by delegation. They leave their task to others and assume they are being taken care of, instead of ensuring everything is done properly. This is where you start getting poor customer treatment from lackluster employees. Most businesses don’t grow to pass this phase.
For those that do grow, this is where the third stage comes in; the maturity phase. To grow your business to the maturity phase, you need to have an entrepreneurial perspective. Instead of focusing on getting the next client, you are looking at how the business will work as a whole functioning system. Your focus is on helping the business to mature into a grown adult that can survive without her parent. I’ll recommend you read E-Myth Revisited if you haven’t to get a clearer understanding of this entire concept.
Becoming a business owner is all about building a system that functions with or without the owner. If you intend on living up to your primary dream of freedom, meaning, or independence, then you have to transition from being self employed to being a business owner or owner of multiple businesses.
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