BUSINESS PLANS

Are You Creating a Job or a Business?

Small-business columnist Rhonda Abrams uses a set of four criteria to determine the scope and scale of new businesses.
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Picture three would-be entrepreneurs, each signing up for a seminar on Starting Your Own Business.

The first one thinks, "Great. I'd love to leave my job and work for myself. I'd rather work hard and be my own boss, even if it's riskier."

Another smiles, imagining the possibility of being able to pursue his hobby as a business. "I could take the early retirement my company is offering, and make a little extra money doing something I enjoy."

The last one envisions something entirely different. She's been working on a new invention. She thinks to herself, "If I can get the funding, I know I can build a business that will make millions of dollars."

Each of these entrepreneurs might use the same words, but they have quite different concepts in mind when they say, "I want to start my own business."

When I first went to work for myself 16 years ago, I fell into the first category. Like most self-employed individuals, I was looking for a way to be my own boss, to make sufficient income to support myself, and to have interesting work to do. But I didn't want to have any employees or added responsibilities.

It worked. For well over a decade, I provided consulting services as a self-employed individual. I had independence, interesting clients, challenging work. I worked hard, but also had enough spare time. I made enough money to support myself.

But eventually, I realized that, as a consultant, I was selling my time, not leveraging my work into more lasting value. The minute I stopped working, the money stopped.

That's when I decided to start a different kind of business, not just have a job. I wanted something of lasting value not just current income.

Based on two primary factors -- the role of the business for the entrepreneur and their long-term plans for the business -- I developed a set of four classifications to describe the different scale and scope of businesses. These are:

  1. Actualizing Activity: Entrepreneurs who are launching an "Actualizing Activity" business have additional sources of income or can survive on very little income. These fortunate entrepreneurs are able to choose which business to start based primarily on how it meets their personal goals, not their financial requirements.
  2. Solo Sustainer: The largest group of businesses fall into the classification of "Solo Sustainer" companies. These are one-person businesses that provide critical income for the entrepreneur. You know many people who have Solo Sustainer businesses -- consultants, hair dressers, construction workers, doctors, and on and on.
  3. Balanced Business: Overwhelmingly, the majority of businesses with employees fall into the category of "Balanced Business." By "balanced," I don't mean that their books are balanced, although I certainly hope they are. Instead, what I mean by "Balanced Business," is that the goals of the founders/owners for the business are fairly well balanced: the business is designed to be a career for the owner, and it provides jobs for others. The business provides current income and may be capable of providing lasting value. The business is big enough to support growth but small enough for the owner to be able to control it. You deal with "Balanced Businesses" every day. They generally have two to 25 employees, in all kinds of industries.
  4. Visionary Venture: These are the businesses that get all the press -- the exciting, sexy, risky new businesses that aspire to great heights. The entrepreneurs who start "Visionary Ventures" hope to grow huge and one day sell the business or go public. They require greater amounts of money to fund. Obviously, only a very small number of companies succeed as Visionary Ventures. Many fail completely; others are revised into more manageable, balanced businesses.

Remember, having a bigger business isn't the right choice for everyone. When I decided to change my "Solo Sustainer" company into a bigger enterprise, my problems and my debts increased, and my income and spare time decreased.

So find the right kind of business for you and your needs and lifestyle. And remember, your goals may change over time -- just as mine did.

Copyright Rhonda Abrams, 2002


Rhonda Abrams writes the nation's most widely-read small business column and is the author of The Successful Business Organizer, Wear Clean Underwear, and The Successful Business Plan: Secrets & Strategies. To receive Rhonda's free business tips newsletter, register at www.RhondaOnline.com.

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Last updated: Oct 17, 2002




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