Don't Let Your Business Mistreat You
Too many business owners are letting their business treat them poorly. Here's how to fix it.
You and your business are in a relationship.
That sounds a bit odd and creepy, but it’s true.
And it’s a rather unique relationship, and much different than if you were simply an employee, of course.
It’s as complicated as Justin and Brittany in the 2000s...
But one helpful paradigm I’ve used to parse out my relationship with my businesses is this: I am both an employee and a business owner. And those are distinct roles.
I’m an employee because I work in the business. While I enjoy significant time to pursue other things I’m passionate about, if I left indefinitely, there would be a void.
And I’m an owner because I invest capital into the business (working capital, and sometimes cold, hard cash) and expect a return in the form of distributions and equity growth.
And really, these are two very different roles. And sometimes, they’re even in conflict.
What may be good for “Scott the employee” may not be good for “Scott the owner.”
Over the years, I’ve observed business owners allowing their business to “mistreat them,” either as an employee or as an owner. Or sometimes as both.
That’s not fair.
That’s not fair to the owner. That’s not fair to the owner’s family. That’s not fair even for the employees, because a mistreated business owner is an unmotivated, unhappy, and unfulfilled owner. I know. I’ve been mistreated by my business many, many times. All of it is my fault, of course. I let it happen.
Let’s dive into these two roles a bit, shall we? The role of the business-owner-as-employee and of the business-owner-as-owner. What standards should we expect in each?
Business-Owner-As-Employee
If you work in the business you own, here’s what you should demand of your business:
A Market Wage
You should be paying yourself a market wage for the work you do. If you had to hire someone to do your job, how much would they expect to be compensated? But, but, but... what about taxes? That’s dumb. Not paying yourself a market wage artificially increases your business’s profit, and your numbers no longer tell a true story of how your company is doing. Want to save a few thousand dollars a year only to have bad financial reporting? That’s an unsophisticated operator’s mindset.
Work In Your “Zone of Genius”
As an employee, you should put yourself in a role that allows you to do what you are passionate about and do exceptionally well. Too many business owners do jobs in their business that suck the life out of them. They do this either because they are lazy (not delegating, not hiring) or because they feel guilty (”I could never ask them to do that for me!”). Don’t fall into this trap. Consistently pursue the day-to-day work that “lights you up,” and delegate the rest.
Great Perks and Benefits
Why not treat you, the employee, like a rock star? Because if you are keeping a business afloat in this crazy world, you are one. So don’t skimp. Drive a nice vehicle, have the company pay for your spouse or partner if they accompany you on a work trip, and give yourself a nice little Christmas bonus. Don’t do this to the detriment of the rest of your team, of course, but don’t just take the crumbs either. Otherwise, you might quit on yourself one day.
Business-Owner-As-Owner
Now let’s switch hats. Since you are the business owner, don’t settle for anything less than the following:
10-15% Net Profitability (EBITDA) (Net Operating Income)
You, as a business owner, HAVE TO get your business to a minimum level of profitability. And for the vast majority of small to mid-sized companies, this is 10-15%. Why? Because after debt service and taxes, you’re left with 5-7% in your pocket. You, the business owner, must continue to push yourself and your team (likely led by you) to these numbers. Without this, the next two do not exist.
Distributions Once 2-3 Months of Core Capital is Reached
Once your business has saved up 2-3 months of ALL expenses in cash, there are a few compelling reasons to keep the money in the company. I can think of 3-4, but that’s another post. Why not distribute this extra cash to you, the owner? Isn’t that one of the main advantages of owning a business, a financial return you can use personally to support your family’s dreams, give to others, invest, and/or enjoy?
A Return “Worth the Risk”
Every business has a “risk signature.” Some have risk of injury/illness/death, some have risk of losing the investment of others, some have legal risk, and some have all three! Regardless, as the business owner, you must have a regular, honest conversation with yourself about whether the risk is worth the return. High-risk business breaking even? That’s not going to work. That’s your business abusing you as the owner.
Wrap Up
You deserve to be treated well by your business. In the same way you’d counsel a friend to leave employment if they were being treated poorly, you should part ways with your business if it’s mistreating you as an employee. And, in the same way you’d think a friend was crazy for slaving away at a company that’s generating profit, you should either fix or move on from your business if it’s not providing adequate return for you, the owner.
These are strong words and high standards. But don’t forget: you deserve it. Don’t settle.
Thanks for reading this post. I appreciate you. In return, please share this with those you know who may be interested.
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