Why did you start your business? Business owners start their businesses for a whole host of reasons. I have come across people who have started their business when they:
- thought they could do better on their own, rather than stay with their employer;
- were made redundant and rather than go back into employment they took a risk and went on their own;
- had an idea to make or do something new and different. A new niche or market encouraged them to take a risk.
For many business owners, that initial reason for starting up is wrapped up with a sense of having more freedom. That could be freedom to make their own decisions, take their own risks. Equally it could be the freedom to work where and when it suits their lifestyles.
Typical Business Owners
Unfortunately, for far too many business owners, that freedom doesn’t come in big measures. That work / life balance is always round the next corner. There’s never enough money to buy free time. The business demands more time and effort than expected. That freedom to make decisions turns out to be regularly reacting to problems that seem to get in the way of growing the business.
And that probably describes the world for many business owners, call them ‘typical owners’. Especially with COVID and a recession, they are aspiring just to survive.
Value Builder Owners
But there are some business owners who aspire for more. The research done by the folk at The Value Builder System, shows there are owners, let’s call them ‘value builders’, who apply 9 principles of business that build solid companies and personal wealth. I’ve been looking at those principles in greater detail over my last few blogs.
The first six principles were:
- Start with the end in mind
- Prioritise value over revenue
- Own your product
- Protect your equity
- Win subscribers not customers
- Build a business that runs without you
- Sell a few things to many
Principle 8: Run your business like it’s a public company
The most valuable companies are run with financial rigor. Some small businesses run as if their sole purpose is to fund the owner’s lifestyle. Many use the spending power of their business to buy trinkets and baubles like cars and expensive trips that further fuel their ego and get them noticed in town.
However, if your end game is to sell to a strategic acquirer, then you need record-keeping that will stand up to their scrutiny. That is why one of the 8 drivers of value, Financial Performance, is having financial records and audits that are reliable and so more trustworthy.
Applying This Principle
You may recall me talking about a client of mine, Matt Driver, who owns Mint IT Support. The business provides IT support to primary schools. Matt knows how to deliver IT services to primary schools. He grew up doing it, knows how schools work and what is important to head teachers. He is good at it.
Matt is a techie and is numerically literate, but he doesn’t do accounts and finances. So, what has he done to run his business with financial rigor?
- From day one he has engaged a firm of accountants to advise him and provide regular management accounts as well as doing the annual accounts and tax returns. Jan and Thomas at The Sanders Partnership provide Matt with a proactive approach to accounting and financial management.
- Matt has an office manager who does all the bookkeeping and budgetary control.
- The business uses Quickbooks to keep its accounting records.
- There is a management team to run the business when Matt is doing things outside the business – it runs without him a lot of the time.
- Finally, Matt has joined a Mastermind group of other business owners to advise and challenge him, holding him accountable to his goals. Watch him here.
Another Business that applied financial rigor
Jay Steinfeld, an accountant, joined his wife’s business selling blinds in her retail store. Her business was such a success he decided to open a second store. It was 1993. Steinfeld invested $1,500 in his first online advertisement, which was mostly an electronic version of his brochure.
Over the next few years, Steinfeld continued to experiment with online advertising. His business model was crude. When customers responded to an online ad, Steinfeld instructed his staff to tell the caller that someone from the customer service department would call them right back. The employee in the store would then call Steinfeld, who in those days spent most of his days driving around Houston installing blinds, letting him know someone had responded to his ad. Steinfeld would pull off to the side of the road and call the customer back. With a calculator and notepad in hand, he would take their order from the front seat of his van.
It was 1994, and Amazon’s early success got Steinfeld wondering if people would buy blinds online. He ran the idea by a few customers, who balked, saying that blinds were different from books because they needed to be measured and installed. Undeterred, Steinfeld invested $3,000 to build his first online store.
Eventually, Steinfeld got to the point where his online orders eclipsed the $1.5 million in sales he was making through the store. In 2001 Steinfeld decided to go 100% online and launched Blinds.com.
Unlike many of the first-generation online companies, Steinfeld grew Blinds.com like an accountant. He was determined to run his business with the same rigor as a publicly listed company. He built an experienced management team and took the unusual step of assembling an outside board of directors even though Blinds.com was private.
The board met quarterly, and each of Steinfeld’s senior managers were asked to prepare and deliver formal presentations to his board. Steinfeld hired a Big Four firm to complete a full audit of his financials each year even though there was no need to.
By 2014 Blinds.com had grown to 175 employees and, at more than $100 million in revenue, was the largest online retailer of blinds in America. Even though Home Depot had close to $90 billion in sales at the time, Blinds.com was outperforming them in its tiny niche, which made Blinds.com irresistible to Home Depot. On January 23, 2014, Home Depot announced the acquisition of Blinds.com.
You can hear Jay’s full story in her interview from John Warrillow’s Built to Sell Radio, a regular podcast revealing the stories and advice of business owners who have sold their businesses. To hear the full interview, click here.
So, are you building value in your business?
Consider recruiting an outside board of advisors, and host quarterly board meetings where key managers are asked to present their operating results, along with plans for the quarter ahead. Or, join a mastermind group and use peer support and pressure to keep you and your goals honest.
Invest in bookkeeping and quality reporting from your accounting firm. Work with a firm that uses the latest technology and is proactive in its attitude.
You can also take the value builder assessment to see where you are in your business now and identify where you need to make improvements.
In the meantime, please get your free copy of the eBook, Famous Or Rich: 9 Ways Value Builders Prioritise Wealth Over Recognition.