top of page

Are You Running An Asset or Your Baby?

Do you think of your business as an asset? Or is your business your baby? Let me set the record straight. It's not your child or your baby. It's an asset. And, just like any other asset, it has (or should have) value.

Every business has a backstory; some are downright riveting. Others are ordinary. Regardless of the details of your backstory, if you were the founder of the company, it probably goes something like this—

You found yourself out of work, either voluntarily or involuntarily.

You saw a need for some product or service.

You got very excited about creating something new, so much so that you poured your entire life savings into it.

You launched your company with visions of a great future.

You dreamed that someday you would sell your business and retire in style.

Then, the business became successful somewhere along the way, and something unexpected happened.

You got caught up in the daily grind, and the business became a source of income and lifestyle.

Then, it became a job, and you stopped thinking about the business as an asset.

Sometimes this cycle takes years. Sometimes it happens so quickly that you don't have the time to suffer. If the latter describes you, you're lucky! But, for most of us, the struggle was|is real. The pressure was|is enormous. The risk was|is more than just money. It was my spouse and family. It was future security. It was life on the edge.

But now that you've made it through the eye of the needle, it's time to enjoy the spoils. After all, the spoils are what made the struggle worthwhile.

Don't get me wrong. I'm not saying that you shouldn't eat what you've killed—quite the opposite. But, I suggest you enjoy the spoils AND continue thinking about your business as an asset. And, if you do that relentlessly, the spoils will be greater than you can imagine today.

You see, you think differently about a job than you think about an asset.

A job is a source of income. A job provides for your family and is usually easily replaceable. Whereas an asset is precious, something for which you've worked hard. An asset has emotional ties to you and your family. An asset has value. An asset is something that you can extract money from in the future. If you're fortunate enough to have children, you don't consider them an asset. Why, then, would you think of your business as your baby?

Many owners leave tremendous value on the table when it's time to exit because their focus is on income generation (a job) rather than being focused on building enterprise value (an asset). You invest differently when your primary objective is to improve long-term value rather than short-term profit. And make no mistake, every dollar you put into your business, whether out of your pocket or reinvested profit, is an investment. You should never spend money on anything

in your business. It should never be just an expense. It would be best if you always thought of money spent in your business as an investment. You shouldn't invest a single dollar unless you can clearly articulate the return on investment (ROI).

In my last company, whenever one of my managers or front-line employees asked for money to invest in systems or software or whatever, they already knew I was going to ask, "What's the ROI?" And if they couldn't clearly articulate it, they wouldn't get the money. It became such a mantra for me that the long-running joke around the office was, "Tom wouldn't invest in toilet paper unless he understood the ROI!" Thank goodness I did!

So, how can you have your cake and eat it too? How can you enjoy income and lifestyle AND build value in this asset that someday you'll be able to monetize? The process starts by balancing conflicting priorities with the end in mind.

You have a constant internal conflict of competing priorities. You are fighting a battle every day. That battle is between the owner and the employee. I'm not talking about between you and your employees. You are on both sides of this battle. On the one hand, you're the employee or operator who deserves a high income and the perks that come with delivering results. On the other hand, you're the owner who demands those results and more because you're trying to build long-term value.

Owners and operators think at different levels. There is no better or worse. No right or wrong. Just a different approach. Most business owners are operators who get the job done and deliver results. Far fewer act like owners.

If you want to eat your cake and have it too (which is the correct use of that phrase), you need to learn to be both. It is a delicate balance. The employee wants to get the job done. The owner wants the job done right. The employee wants to know why he can't put more resources into a project. The owner wants to drive efficiency. The employee wants benefits like vacations where he can get away from work for a while. The owner keeps the cell phone turned on in case of an emergency. The employee wants to be paid well now for his hard work. The owner knows that there is a bigger payday in the future. That payday's size and terms depend on building value in the business today.

Decide that building long-term value in this asset is the most important outcome. Maximizing that asset, and valuing your business correctly, is a step in the right direction. Decide now to quit your job, and start acting like an owner.

15 views0 comments


bottom of page