Building a business from the ground up is unbelievably hard. It truly takes years to do it. I did it three times. If I could go back and do it all again, I’d try to buy it. Looking back, I don’t remember one client ever asking me whether I started from scratch or bought my practice. Does it really matter?
The first business I tried to start on my own was a mix of financial services and the law. On one hand I was trying to sell insurance products while on the other hand I was providing legal services and counsel. Very quickly I learned the best avenue for me was that as a lawyer. I put on my suit and tie and let everyone know I had a shingle out. At first I practiced “door law” which was, whoever walked through the door looking for a lawyer, yes I absolutely could practice that type of law! This time was full of anxiety and low revenue as I was trying to learn something new everyday while learning how to make the practice of law profitable. My wife had some savings given to her by her family and we relied on that for most of the first year. Once I figured it out, revenue started to double every year until I got to a good financial spot. Unfortunately when I got there, I realized that the business I built brought me financial security, but it didn’t give me the happiness or fulfillment I wanted. After working hard over nearly a decade to build this successful, profitable business, I simply didn’t want it anymore. Not looking back and with no regrets, I moved on.
While my law firm was growing, my wife came up with a great idea. It was a baby bib made out of fitness fabric to revolutionize the bib world. It was simple and it worked. It took us about 3 years and $75K of our own money to do research and development on the bib and truly be ready to grow the business. Once we got on Shark Tank, sales took off! The month before the show aired, we sold 5 bibs online. The month the show aired, we sold 2,000! I dove fully into this opportunity and drank water through a firehose for 6 months trying to figure out our next steps. We made a choice not to seek investors and try to figure this out on our own. We made many mistakes along the way and learned many lessons. (Click here to see our lessons learned in bibbitec). At the end of the day, it was our choice that this business was not for us and that our passions lay elsewhere. After nearly 6 years of blood, sweat and tears, we walked away with our marriage stronger than ever imagined and ready to face whatever lay ahead. It was the second business we built from scratch and walked away from.
Third time was a charm.
Do your research before you take the leap.
Before you decide to start or buy a business, You have to do exhaustive research. This is not sit down and do a few google searches and have a few conversations, you really need to dive deep and try to understand what the business you want to get into looks like. Interview those who have been successful but just as importantly, interview those who are struggling or have failed. What would they have done differently? You have to be patient here before you act. When I started my wealth management business for the second time, I thought I knew what I was getting into. I didn’t. It’s hard to say how much I could have learned from research alone, but if I moved slower and did more research, I would have saved many weeks and months and gotten to where I needed to be much faster. I had done my exhaustive research many years prior and my mistake was not doing it again.
There is no shortcut
Whether you build or buy it, the path to success is a long and tough road. If you want to buy and integrate into a business, that will take years. If you want to start from zero, that will take you years as well. The question really becomes what capital or resources do you have available to you to get into this new business. If you don’t have funds but you have expertise and time, then you build it. Start building before you leave your other job. If you have resources or funding, then buying it may be a better route. Finding the right business to buy is a very painstaking and often lucky process. Get someone to help you. Structure the purchase to make sure it’s fair to both parties. Neither path is better nor easier. Deciding which route is better for you will significantly increase your chances of success.
Release your Ego
While those who built their businesses love to speak about how brilliant and innovative they are, it’s really more a matter of hard work meeting good fortune. Those self proclaimed badges of honor really don’t add any to your happiness or success. If buying a business is the better route for you, it will take just as much hard work and good fortune. At the end when you have the business and life you always wanted, no one cares whether you built it or bought it, your success and experience will be equally as valuable to that next generation of entrepreneurs. While I very much love the business I have built, I have met many other advisors who bought their businesses and are as, if not more, happy than me in the business they now have.
Start with the end in mind
The best single piece of advice I can give anyone looking to start their own business is to create a vision of what exactly you want your life to be in 5 years. With that in mind, let that end goal drive what and how you start your own business. A critical book I read during my journey was The 4 hour work week, by Tim Ferris. The most impactful statement for me was when he said that most people truly don’t care whether or not they become a millionaire, what they are seeking is to have the freedom and independence to live the life that they perceive the wealthy to live. You are still going to need to answer to someone, will it be a boss or your clients/patients/customers? Does your ideal life require a large lump sum of money or a steady stream of income? Once you have that vision, go and build the business that meets it.
Debt or Indebted, you’re going to need both.
I feel the single most important decision in growing or building your business is the role of debt you incur. I feel debt management almost alone is the largest indicator of future success. In all three businesses I built, I only spent what I had and never went into debt to build the business. This can be very hard depending on what stage you are at in your life and the spending needs of your family. If you choose my path and spend what you have, it’s vital to have a clear plan prior to incurring debt and ensure that your debt service doesn’t outweigh your revenue generation. If you choose to buy a business or borrow to start your own business, the quality and accuracy of your business plan is vital. You should strive at all costs not to collateralize the debt with your personal assets. You should also value liquidity almost above all else and utilize debt to keep as much liquidity as possible. Whichever way you go, you must have a solid plan before incurring debt or the debt will dictate your plan.
One of the reasons I chose not to ever borrow funds from friends or family for any of my business was it was not only the debt I wanted to avoid, it was the feeling of being indebted. I will say without any reservation that every single business I started and grew would not have gotten anywhere without the support, referrals and business of my family, friends and colleagues. Whenever I went and asked for support and help, they were always there for me with a “how can I help” attitude. Not once did any of them every make me feel indebted to them. It’s for that reason that whenever I have the opportunity to guide or support someone else looking to build their own business, I try to help however I can.