I’ve spoken at length about “how” to start a business. That is, after all, the primary focus of this blog. But one thing I haven’t really spoken about is “why.” Not why you want to start your own business in the first place of course, that speaks for itself, but why you are starting this particular business? While there are any number of explanations, it’s my feeling that they all boil down to two specific (and very simple) reasons. You either want to create a job for yourself (and potentially others), or you want to build up a business in order to sell it on for a hefty payday, before moving on to something else. You may be asking yourselves why this is important. Well, knowing why you’re starting up a business in the first place can inform how you go about running it, and there are specific things you should and should not do depending on what you ultimately want to get out of it. Let’s look at the two types.
Creating Your Own Employment: I feel that this will be the most common reason among my readers, as much of my work on this blog pertains to this type of business. Ultimately, you’re striking out on your own because you want a job, and you want it on your own terms. Just like me. You’re in this for the long haul, building a successful, sustainable business while making as much money for you (and your team) as possible. You want to keep your overhead down by budgeting carefully and cutting unnecessary costs as quickly as possible, as well as make smart investments in growth, and take steps to maximize your company profits (and by extension, your Personal Independent Earnings) while keeping your pricing structure on your products and/or services affordable for your clients. There is a wealth of information on this site that will help inform your business strategy, far too much for me to link to all of it here.
Building To Sell: This is a whole different ball game. Your end goal in this instance is not long term sustainability for maximum profit, but rather building a business that will attract a buyer, who will in turn pay you a substantial amount of money that you can then flip into building a new business, or if you’re very, very lucky, retire. Your earnings are tied directly to the sale price, so your salary from running the business will probably not be as much as it could be. Essentially, you’re spending money now to make far more back later. This involves a substantial amount of risk, but the payoffs can be staggering. Youtube was sold to Google for 1.65 billion dollars. Facebook purchased Instagram for a billion dollars on the dot. A payoff that size is extremely uncommon, but not out of the realm of possibility if you have a very good idea. Your focus when starting a business with the intention of selling it is to develop a proprietary product or service that a larger company has (or will have, following current trends and identifying future ones is very key here) need for. When starting out you want to have very clear goals of how you want to sell the company, and to whom. It’s best to have as many prospective buyers in mind as possible, so that you have multiple options should your first choice not go for what you’re offering them. You’ll also want to be able to show that your business is sustainable and expandable, making the investment you want a larger company to make far more worth it to them. As with any other business you’ll want to keep costs down as much as possible, making it that much more of a lucrative deal.
In either case, the end point is the same, the biggest PIE possible. Identifying exactly why you’re starting your business and what you hope to get out of it, and then tailoring it towards your end goal, will almost certainly help you reach the highest earnings you possibly can.
