The following article was written by Tuck Aikin several decades ago about what you don’t know about business can destroy you mentally and financially. Even though it is several decades old, it is as true today as it was then. I hope you enjoy it.
“So, you’ve been writing code for a software subcontracting firm for several years now, and you’ve decided you want to start your own software company. Why do you want to start your own company – after all, you’re well paid as it is now?” we asked. “So, I can make the big bucks as the owner,” he said. “I can do the same work but be paid much better. After all, I’m doing the majority of the work now and my owner rakes in all the profit. Why should I work for him when I can work for myself?”
Implicit in this bit of logic of course, is the idea that with only a small bit of extra work, that of owning and running a business, it should be a relatively easy step to harvest the profits that presumably would be generated by the firm, as well as earn a salary commensurate with what he is earning now. This idea that doing the work is essentially the same as running the business that does the work is a common belief. Unfortunately, it is probably the single major reason people become entrepreneurs. And unfortunately, it is wrong.
In his book The E Myth Revisited (Harper Business, 1995), author Michael Gerber refers to this as the Fatal Assumption: “If you understand the technical work of a business, you understand a business that does that technical work.” Further, Mr. Gerber believes this assumption is the root cause of most small business failures.
This “technician” approach to founding a business, he observes, rather than freeing [the owner] from the limitations of working for somebody else actually enslaves him. Suddenly the job he knew how to do so well becomes one job he knows how to do plus a dozen others he doesn’t know how to do at all.”
Gerber points out. What once was work the budding entrepreneur liked to do, he (or she) can no longer do because he no longer has the time to do it well or perhaps even do it at all. The work week abruptly expands from 40 to 90+ hours, learning and doing other things, like:
Promoting
Estimating
Selling
Bookkeeping
Record Keeping
Contracting
Recruiting
Hiring
Supervising
Training
Coaching
Networking
Joining associations
Borrowing
Worrying
And yes, reinvesting profits in the business, not in the owner’s bank account!
And this is only a partial list (see below)
So where do we get the idea that owning and running a business is pretty much the same thing as doing the work of the business? That’s a tough one, but I suspect it’s pretty much the same naive idea that possesses a citizen who becomes a candidate for the school board – “I attended school,” the thinking goes, “so I essentially know how one should be operated.”, or “I go to church so volunteering to help run it should be just about the same thing.”
Our problem is, of course, that we don’t know what we don’t know, and unless some wise counselor, mentor, friend, or relative who we respect sets us straight, we’re doomed to a painful learning experience.
Fortunately, the consequences of such learning in a volunteer capacity are relatively minor when compared to the consequences of launching a business and having it fail. Volunteers can always quit without loss of income; family and friend’s hard-earned assets aren’t drained; the enjoyment of doing work one knows well isn’t spoiled. Yes, disillusionment may take hold but not nearly to the degree that occurs when a business goes under.
Think about it. Just how long did it take you to learn the intricacies of your present work? How much of what you know was learned in a formal educational setting, and how much from practical experience? Even in your first job, probably relatively simple labor, did you already know everything you needed to know, or were you surprised to find out there was a lot to learn?
If you’re like me, even after thirty years of work, I was continuously learning something new, and in fact, I still am. The ground rules for starting and operating a business in a mature market-driven competitive economy like ours are constantly changing and they are astonishingly complex.
What’s complicated? Here’s a sampling of what you don’t know that can destroy you mentally and financially:
So, a word to the unwise: realize that knowing how to do the work isn’t the same as owning and running a business that does the work. Before launching a business startup, seek as much outside information as you can about operating the business that does work with which you’re familiar. Learn what you don’t know, assess whether or not you possess the new owner/manager skills that will be required for success, then decide. That’ll be a wise move indeed!
