Over the course of more than 20 years developing businesses, I have learned a thing or two about business growth cycles. I know from experience that most would-be entrepreneurs have no idea what it takes to run a business. Further, they don’t know when they can legitimately refer to themselves as an entrepreneur, so they wing it.
I have heard people refer to themselves as entrepreneurs but they work at someone else’s company. Others call themselves business owners but their operation (if you can call it that) has no infrastructure, no formalization. Some think they are self-employed, but they’ve never actually sold a product or service, so there’s no actual money to employ themselves.
Do any of these scenarios sound familiar to you? Do you fall into either of these categories?
I am going to simplify this process for you. And for many of you, give you an out. I know the mantra right now is “hustle” and entrepreneurship is romanticized. I have developed a rubric that I use to identify and categorize my clients and prospects so I can truly distinguish whether I am dealing with someone who is self-employed, an entrepreneur, or someone who wishes he or she was either of those two designations.
This first term is important, because many people fall under the category of Emerging Business. You are an emerging business if the following are true:
- You have a great idea, but you have not yet learned to present it.
- The potential business has one owner
- Your endeavor has not yet generated any revenues
- There has been no formal corporate development, which includes steps like incorporating your business or entering into business agreements
- You still have your day job and you’re positioning your idea to be your side hustle until it can replace your main income source
If this is you, let me give you the next steps. The first thing you want to do is assess the feasibility of your idea. The easiest way to do that is to run it by your most honest and objective family members and friends.
You may worry about someone stealing your idea. Let me tell you: Ideas are a dime a dozen. Execution is what takes talent and effort. Most people will not execute. So don’t worry about confidentiality agreements and keeping your idea close to your vest. At this point, you just want to make sure the idea is something the market wants.
The second thing I will advise you to do is establish of list of things you need to do to take your emerging business from being an idea to at least being formalized. Put the tasks on a timeline and start doing.
Resist the urge to jump in with both feet until you’ve done some of the basic work of starting a business. Don’t quit your job and DO NOT behave unethically: Don’t use your employer’s time to work on your own business. And never try to steal clients from your employer.
The second category in my list is self-employed. Freelancers are self-employed. Being self-employed takes a certain mindset and a set of proficiencies. In some ways, being self-employed is very much like being employed by someone else. The primary difference is you are your own employer and your service offerings are usually limited to those things you can do yourself. You may be self-employed if the following are true:
- You are 100% billable in your business
- A sales meeting cannot take place without you
- YOU are the board of directors
- You save money by doing support services yourself (proposals, accounting, legal)
- If you take a day off, the business closes that day
If this model sounds like what you do, you are self-employed. There are great advantages to being self-employed. If you can create consistent income streams, you can enjoy total time freedom, meaning you can work when you want and need to work.
Of course, the drawback is many freelancers have to deal with the uncertainty of inconsistent income, late payments from clients, and being overworked and underpaid.
Running a small business is hard work. There’s no way around that. And most small business owners will tell you that the work doesn’t stop, particularly during the early years of the business. Here’s how to tell if you have a small business:
- Fifty percent of your time is billable to the business and the rest of your business is done by staff members who can operate your business in your absence
- You only have to show up to “close” the deal
- You have at least 3 board members
Like being self-employed, owning a small business can be your start or your finish line. That part is up to you. The best piece of advice I can give any small business, particularly one that sells products and not services is to make sure you remain relevant by continuing to invest resources into marketing.
We are about to become more connected than most of us can even dream. The Internet isn’t going anywhere. In fact, it’s going to continue to evolve and as the months (I don’t think we can count technological advances in years anymore) march on and your pantry and fridge collaborate online to re-order your groceries whenever you run out of something, you will learn how essential it is that you and your business are also part of the Internet of Things.
Twenty years ago, being an entrepreneur wasn’t popular. Today, it’s everything. Everyone things they’re an entrepreneur. Everyone is trying to position their side business selling vintage clothes on Amazon as entrepreneurship. I have a distinctly different definition of entrepreneurship. You are an entrepreneur if:
- You generate multiple streams of revenue from a variety of resources
- You don’t work in your business, you work on your business
- Your endeavors don’t require anything more of you than your oversight and leadership
- You create other entrepreneurs
Entrepreneur. Business owner. Self-employed. Each has its own distinct set of characteristics and behaviors needed to have success in each.
These are not amorphous terms that you assign yourself based on how you feel, or what you wish you were. Each term is real, quantifiable, and determined by actual outcomes. Which are you?