Book Excerpt: Running a 21st Century Small Business

Companies employing ten people or less are the economic powerhouses of the twenty-first century. Now in a new and updated edition, Running a 21st-Century Small Business tells you how you can start your very own small business–and keep it running profitably. Read Chapter 1.

CHAPTER 1

Why Self-Employment?

SO YOU WANT TO OWN YOUR OWN BUSINESS. You’re not alone. The idea of being in business for oneself is as American as apple pie or baseball. It’s the rare American who hasn’t at least considered the idea from time to time. (This is not to say that the goal is unknown in other nations or cultures. In fact, citizens of Australia and Taiwan have an even higher level of interest in self-employment than do citizens in the United States.)

Many do take the plunge. From selling Avon or Amway to purchasing a McDonald’s franchise, from marketing a brand-new idea to hanging out a dentist’s shingle, from buying out their boss to opening a hardware store, millions of otherwise intelligent folks give up good-paying jobs and sink their life savings into being their own boss.

What would motivate a person to risk his livelihood, his marriage, and his emotional health? Why would a person want to work sixty or eighty hours per week for little or no income? Who are these entrepreneurs who give up the safe life for a taste of life in the fast lane? What is the big deal, anyway?

Money? The pursuit of the almighty dollar and all that goes with it? Are we a nation of aspiring Donald Trumps? Yes, and no. Many, if not most, of those who choose the path of self-employment expect to make more money than they could as an employee. They’re willing to put up with inconvenience and temporary poverty in order to create a high-income position for themselves in the future. Those primarily driven by monetary considerations also generally expect to “get rich.” But the lure of excellent pay alone is not appealing enough for most folks to agree to even temporary sacrifices. If it were, we’d see these individuals taking a safer route to the same end, such as furthering their education, job hopping, or going into commissioned sales jobs . . . not starting a business.

Personal independence takes a close second to hard cash in driving an employee to become a boss. This type of individual may find it hard to work for others, or simply want to do it his way. Folks who find being employed by others about as desirable as swimming with sharks don’t care how successful they are in business. They’ll keep the doors open regardless of the sacrifice to self or family. They’d rather be operating a one-man shoe-repair store than be vice president of a $10 million division of a conglomerate. You’d be amazed at how many small retailers fit into this category. You’d be even more surprised to learn how many doctors, lawyers, CPAs, and other professionals make substantially less than their potential income in order to be “on their own.”

Among those entering the world of self-employment is the managerial-level woman who has what it takes to run a business, but who has hit the “glass ceiling.” That is, while her employer may talk a good game about equal opportunity, and may have made great strides in this area, there’s a point above which there is still a sign on the door: NO WOMEN NEED APPLY. Thus the talented and motivated female often finds that the only hope for reaching her full potential is to open her own enterprise.

Another large group of small business owners is motivated by a desire to make a special contribution to the world—one they believe would be impossible to make working for a profit-seeking enterprise. Here you’ll find the hobbyist who wants to make sure other model-train collectors in Dubuque have a place to buy, sell, and trade their collections.

Also in this group are the lawyers who wish to provide low-cost legal services to special segments of the population who couldn’t otherwise afford a lawyer; doctors, dentists, and other professionals with similar motivation; pastors of independent congregations; founders of specialized schools, cooperatives, and credit unions. The list of those who find small business an outlet for their community-service orientation goes on and on.

Interestingly, this selfless approach often results in much greater financial success than the business founded to create wealth, probably as a result of the tireless devotion that such an enterprise produces. When the primary goal of an owner is making money, it’s common to see great swings in the level of desire. When the going gets very rough or too easy, many who have only dollar signs in their eyes lose interest. Those who are pursuing the greater good may feel a stronger compulsion to keep on pushing.

Simply being out of a job has often pushed people into self-employment. This seems to be particularly true when an individual has lost his job due to a merger, an acquisition, a dot-com bust, or changing economic conditions (such as military downsizing).

Having something to prove can be a major motivational factor. A parent, sibling, spouse, or other significant person who is doing well in his own business, or speaks of others who are, could create pressure to give it a try. A rival is making more money than our budding businessman. He sees a small venture as the only hope he has of “keeping up.” A son feels that he must keep the family business going, or do it better than his dad. This group may be acting from a neurotic point of view, and as such will likely be very unhappy in business. Some of our most successful and well-known businesspeople are very wealthy and very unhappy because their drive comes from this unhealthy direction.

Only rarely does an individual who aspires to a life of self-employment fit just one of these categories. More frequently, there is a mixture of forces at work. For instance, the desire for financial independence coupled with a need to call all the shots is a potent combination. The overriding fact remains that, for whatever reason, many in our population will take a stab at going it alone. There’s something very romantic—and very American—about owning your own business.

In this section we’ll try to take a slightly less passionate look at ownership. Our goal will be to provide a set of practical guides that will allow you to come to a logical conclusion about whether you should go out on your own. Every attempt will be made to give you an overview of every aspect of the decision-making process.