Building A Business vs Running A Business

byjrobinson82

146 followers

6 years ago

“You can build a business, or you can run it, but there’s only two ways it can be run, you can run it straight, or you can run it into the ground.”

The Difference Between Running A Business And Building One.

The distinction is made when you consider the reason you’re in business and your plans for the future. Let’s consider an example involving three exceptionally good mechanics. All three are in their early twenties, have similar jobs, similar education and are considering starting their own businesses.

Lets say mechanic “A” wanted to start his own business because he wants to make more money and set his own hours. He doesn’t really think about the future much, he just wants to take care of his family, do a good job and handle issues as they arrive. Mechanic “B” wants to start a business because he wants to make more money and make sure that it stays in good condition so that someday he can pass it down to his children. Mechanic “C” wants to start a business so that he can have total financial freedom and be able to retire at age 55.

Example “A”

Mechanic “A” gets a small loan, buys tools, supplies, equipment, rents a garage, passes out cards and he’s ready to go. He wants to keep as much money as he can so he answers his own phone, takes care of the book-keeping and starting out he has to personally work on each an every car that comes in. This works well for him for a little while, at least until he starts to really get busy. As much as it pains him to do this, he realizes he needs help so he hires a second mechanic, and pays him the lowest possible for the given industry.

As time goes on he has to hire more mechanics and even a secretary. Fast forward about 30 years and you see he has the same number of employees working for him, different people though. He can’t keep qualified people working there long because he only gives raises when they ask for one, he offers no benefits, he only replaces equipment when it breaks. He doesn’t update his building, leaves junkie cars all over the yard, almost never advertises, pockets most cash jobs and he never establishes a process or order of operation for any services.

Mechanic “A” is now in his mid 60s, weekly customers have since declined drastically due to the poor condition of the garage, substandard service and lack of organization. Remember he didn’t think much about the future so he didn’t save any money, his children don’t want to take over his “junk yard”, he can’t keep good employees and there’s no manager to put in charge so he can’t fully retire. It looks like he will be working his fingers to the bones for the rest of his life.

Example “B”

Mechanic “B” gets a small loan, buys tools, supplies, equipment, rents a garage, passes out cards and he’s ready to go. For a short while he has to work by his self until he has enough business to need more mechanics. He makes sure that starting prices are enough to cover overhead and more employees so he doesn’t have to drastically raise his prices later on. Within a few short years he has a staff of about 20 people and most of them got hired on and stayed. He provides benefits, gives raises every six months and conducts regular staff meetings. He keeps up with technology, updates decor, conducts polls to get customer feedback, advertises and updates equipment regularly.

Mechanic “B” is now close to retirement age, right at 65 years old. He has up-sized his garage about three times. He has about 60 people working for him now, mechanics, secretaries and managers. He has delegated all of his responsibilities to others in the company. At this point he only needs to check-in regularly to make sure that the processes that he put in place are still practiced and make adjustments if they are no longer effective. Mechanic “B” has saved money over the years and he’s able to comfortably retire. Some of his children keep working for the company and some go on to other things. In this situation he left a well established and profitable business for others to benefit from.

Example “C”

Mechanic “C” gets a small loan, buys tools, supplies, equipment, rents a garage, passes out cards and he’s ready to go. Because he wants total financial freedom, he knows that its going to take more than one successful shop. He begins assembling a team after working for a short time by his self. He has other mechanics, assistants, managers, a vice president and a fourth shop after only two and a half years. Mechanic “C” drastically increases the number of shop locations by structuring his company as a franchise. Fast forward 20 years, his company has become a national brand with over 2,000 locations and employs about 40,0000 people including some of his own children.

Mechanic “C” is now 55 years old, 5 years earlier he had named and put into place his successor as CEO. He retires and becomes a venture capitalist and an avid philanthropist.

Conclusion

Mechanic “A” ran his business into the ground because he was too focused on keeping money in his pocket, being cheap, not investing, not making repairs, not improving things and not rewarding his employees. Mechanic “B” ran his business straight, and there’s nothing wrong with that as long as you understand that’s where your going with it. We call that a successful “mom and pop” business. Mechanic “C” build his business to become a national brand. Mechanic “A” definitely did not set out to run his business into the ground but his intentions and view of the future lead him down that path. He could have realized this and shifted to be more like mechanics “B” or “C”. Inversely, if mechanics “B” and “C” are not careful they could inadvertently end up like mechanic “A”.

Build your business or run it. Understand the difference and choose carefully.