Posts Tagged ‘owner managed’

When I was researching the book, Breaking Through the Barrrier: What Companies That Grow Do Differently, I would often ask business owners,

Do you want to grow your business?

While I received a range of answers, the typical response was some variant of, “Well, yeah, sure.”  When I probed a bit deeper, asking how much do you want to grow your business, I’d usually get an answer that involved traditional metrics such as market share, annual revenue or head count.  But these traditional metrics ignore one profound truth:

In a privately owned business, the owner’s life should be better because he or she owns the business.

Better is, obviously, a subjective term.  For some owners, better might mean more money – for others, more time off.  A better life could also mean doing work that makes the world a better place.  The problem with traditional metrics is that they don’t address the owner’s quality of life.

So it might be productive to look at business and growth through a slightly different lens.  It’s a lens that helps an owner consider how he or she wants to be involved in the business – a lens that helps clarify what activity the owner wants to engage in on a day-to-day basis – a lens that illuminates how the owner wants to live his or her life.

There are, essentially, four business structures:

  1. Hands-On: The owner does some or all of the work.
  2. Owner-Operated: The owner supervises the line level employees.
  3. Managed: The owner manages the managers.
  4. Enterprise: The owner is largely removed from day-to-day operations.

While to some extent revenue dictates the structure of the business, revenue isn’t the only determinant.  Let me use a couple of my friends to illustrate.  Mike Pasley owns Central Packaging.  Danny O’Neill owns The Roasterie.  These businesses have a similar revenue, cost of goods sold and overhead structure.  Mike operates in the Owner-Operated structure and Danny operates in the Enterprise structure.  Mike has a high need for control and is committed to a methodical approach.  Danny lives at 30,000 feet and abhors operational details.

Both of these guys have profitable, growing businesses and from what I can tell, both guys are happy.  But if for some reason they had to switch places, they’d both be miserable.  It’s not about revenue or market share or profit – it’s about how they live their lives.

How big your business should be depends on how you want to live your life.  If you’re happy in the owner-operated structure, will you be as happy when growth forces you into the managed structure?  Can you accept the loss of control that inevitably comes with growth?  Is your life really going to be better if your business is bigger?