A simple but important factor as to whether or not a business is going to make it.
I serve on the advisory council for the College of Business at Eastern Kentucky University. For a recent meeting, we brought in Dr. Janet Kelly from the University of Louisville as a speaker.
Dr. Kelly did an outstanding job in giving us the good, the bad and the extremely ugly data about Kentucky’s economy. She noted a statistic that fascinated me.
Kentucky is one of the top states for creating small businesses with five or fewer jobs.
Most of them don’t turn a large profit.
The statistic disturbed me at many levels.
In my book “Wealth Without Wall Street” and in numerous columns, I’ve promoted the idea of owning your own business. I’ll be going into my thirtieth year of self-employment in September. I can’t imagine doing anything else.
Self-employment fits my personality profile. I’m a compulsive worker who doesn’t want a lot of supervision. Just show me the goal line and I will get there.
I tried corporate life and it didn’t work for me.
I spent two years as president of a large company.
I concluded that I hated the job, and the people I worked for hated me. The layers of bureaucracy drove me crazy and my desire to break down those layers drove my employees crazy.
I can’t see me ever running a large corporation again.
As KT Oslin once wrote, “I said I do and I signed I don’t and I swore I never do that again.”
I also understand why people get into small businesses that don’t make a lot of money. They want to do something they enjoy or something where they can make a difference.
Even after two bestselling books and national syndication, publishing is a small part of my overall income.
There is nothing I see in the economics of the media business that makes me think otherwise.
Writing gives me a chance to speak out and educate people. It’s not about the money.
For those who want to be self-employed but earn enough to feed themselves and their families, I offer the following tips:
1. Do something that you love, but make sure you are paid a fair price for your labors.
I run into writers who think “making a profit” is some kind of evil. Some are terrific writers but they don’t charge enough for their books, don’t do a lot of paid speaking engagements and do little to encourage people to buy their books.
I see the same thing in other fields. I see restaurants and bars who give the business away and contractors who don’t charge enough.
I also see people who charge so much that they scare off customers.
Pricing your services properly is as important to doctors and lawyers as it is to artisans and plumbers.
2. If you can’t afford to hire good managers, you should be prepared to work 90 hours a week or not be in business at all.
Another point that Dr. Kelly made was that Kentucky did not have enough trained managers to run the businesses the state already has and that attracting new businesses will be difficult until that “manager gap” is filled.
A friend was a first-rate mechanic for a big auto dealership and wanted his own shop. I eagerly followed him when he went out on his own. In fact, I offered to buy into his business. I am glad I didn’t as his poor management skills drove him down the tubes quickly.
As long as he worked on a car himself, it remained first-class service. However, he tended to hire any warm body that walked in the door and gave them little supervision.
I wound up back at the dealership. They had systems, managers and quality control check points.
Which is why they make big profits.
Anyone going into business needs to heed the warning of Dr. Kelly. Do some number crunching and find out if your business has any chance to make a profit.
Profit isn’t an evil. It is a necessity for keeping your business alive.
Don McNay, who lives in Richmond, Ky., is an award-winning financial columnist for Huffington Post Contributor. You can learn more about him at www.donmcnay.com.
Category: Don McNay
About the Author (Author Profile)
Don McNay, CLU, ChFC, MSFS, CSSC is the best sellling author of the book Wealth Without Wall Street: A Main Street Guide to Making Money.
McNay is an award winning financial columnist and Huffington Post Contributor.
He is the Chairman of the Board for the McNay Settlement Group (www.mcnay.com) which provides structured settlement consulting for injury victims, lottery winners, and the families of special needs children.
McNay founded Kentucky Guardianship Administrators LLC, which assists attorneys in as conservators and setting up guardianship’s. It is nationally recognized as an administrator of Qualified Settlement (468b) funds.
Don has appeared on the CBS Evening News with Katie Couric and over 100 radio and television programs.
McNay has Master’s Degrees from Vanderbilt and the American College and is in the Eastern Kentucky University Hall of Distinguished Alumni. Don is a Quarter Century member of the Million Dollar Round Table and has four professional designations in the financial services field.