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Blog: Fresh Tilled Ideas

False Assumptions About Running Your Own Business

Posted On: July 24th 2008
By: Richard Banfield

I really think Paul Graham is smart and I love his writings but I think he is wrong about what owning a business means to the owners. Of course there are some people that will sell their business the first chance they get but it's strange to suggest that's an optimal situation. Here's what he says in a recent article...

One disadvantage of living off the revenues of your company is that you have to keep running it. And as anyone who runs their own business can tell you, that requires your complete attention. You can't just start a business and check out once things are going well, or they stop going well surprisingly fast.

The main economic motives of startup founders seem to be freedom and security. They want enough money that (a) they don't have to worry about running out of money and (b) they can spend their time how they want. Running your own business offers neither. You certainly don't have freedom: no boss is so demanding. Nor do you have security, because if you stop paying attention to the company, its revenues go away, and with them your income.

Both his primary assumptions are clouded by his personal idea of success.

Maybe Mr. Graham is only referring to small businesses only but not every business stops when the owner misses a day of work. If you run out of money you probably don't really own a business, you own a job. You might not work for someone else but if you have to be there to make things happen you are tethered to the day to day like any other job. Single shingle businesses are typically those that suffer from highs and lows that are well explored in the E-Myth.

Running out of money is only a problem if the machine you create money with is broken. By machine, I mean the business and the mentality behind the business. A well designed business can manage the ups and downs of the market. A good business person knows how to make money, in good times and bad. A crap business or business person will not. If a business stops making money the moment you stop paying attention to it then it's not really a business, it's a hobby that happens to pay you from time to time. A truly well constructed and run business must run without the owner's attention.

The other assumption that business owners cannot spend time on the things the want is incorrect. The idea that a business owner would much rather be doing something else is a generalized and subjective opinion. Paul may dislike his business so much he'd rather do something else but I know dozens of entrepreneurs that thrive in their businesses. They love what they do and they don't want to be sitting on a beach wasting daylight when they could be growing a business. I love a vacation as much as the next guy but I'm a business person and that's what I do with my life. I'm really proud of our business and it provides me with a lot more spiritual reward than just making money. Just like a doctor practices medicine business people practice the art of business. Regardless, I still get to travel, surf, play with my kids and hang out with my friends.

I agree that a business is a burden if you don't balance it with the other aspects of life. I also think the term lifestyle business is a crude explanation for why you wouldn't sell for a big payout. It might just be that owning and running a business can be a much more lucrative payout.

I've been through both the 'investment-driven-build-to-sell' situation and the 'slow-growth-highly-profitable' situation. In the slow growth business my aggregate earnings start much slower but can conceivably continue uninterrupted for 20 years. I also own a much bigger share of the business so I didn't need to sacrifice equity for growth to make my company more attractive to an outsider. I'm really not interested in choosing a stranger's interests in my business over my partner's and employee's interests. That's bad for business.