Richmond, KY —
The question people forget when starting a small business is “can it make a profit?”
It’s the most 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. At a recent meeting, we brought in Dr. Janet Kelly from the University of Louisville.
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 on 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 30th 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 myself 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 would 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.
For those who wish 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.
In my publishing efforts, I’ve run into writers who think “making a profit” is 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 occupations. I see restaurants and bars who give their business away and contractors who don’t charge enough.
I also see people whose rates are so high 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.
Dr. Kelly noted that Kentucky did not have enough trained managers to run the businesses the state already has. Attracting new businesses will be difficult until that “manager gap” is filled.
A friend was a first-rate mechanic for a big auto dealership. He wanted his own shop. I eagerly followed him to his new place. In fact, I offered to buy into his business.
I am glad I didn’t buy in 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. His workers did not live up to the standard of excellence my friend was known for.
I wound up taking my car back to 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 decent profit.
Profit isn’t an evil. It is a necessity for keeping your business alive.
DON MCNAY is a columnist for the Richmond (Ky.) Register. Contact him at email@example.com.