Why I’ll Never Start Another Business
I’ve spent my entire life starting businesses—I even wrote a book about how to start a business in 2004—and I’ve spoken at hundreds of seminars encouraging others to do the same. Now I do the opposite.
I’ll never start a new business again. No chance. I’ve found a better way of achieving business success.
For some the start-up phase is the height of enjoyment: it’s fun to be challenged, and it’s fun to win despite the odds. The success makes it worth the effort, they say. But starting a business from scratch can be one of the most stressful things you can do. The financial risk is fine when you’re in your twenties with few responsibilities, but not when you’re in forties and fifties.
We all know the stats that say that most businesses fail in the first five years. We know too that the first few years can be rocky with cash flow issues, challenges with getting the product/service to match customers’ expectations, the drain on savings and the long hours doing every job under the sun. And then there are all the things you didn’t expect you would have to do, like finance and marketing.
So many of us start a business to improve our income and to spend more time with our family. It’s only later that we discover starting a business usually means making less money than our salaried position and spending more time at the office than at home. It’s the opposite of what we expected.
I’ve started three businesses in the past 18 years and sold each of them in private equity and trade deals. I’ve had lots of fun along the way, but when I analyse risk/reward over the past two decades, a pattern has emerged. I’ve realised that the years of owning a business go through three phases:
- Phase One: The years when it’s all work and no money
- Phase Two: The years when it’s all work and some money—unpredictable and irregular
- Phase Three: The exit, when there’s a burst of activity for 16 weeks, then more money than I ever earned during Phase Two (which might have lasted for five years plus).
So I burn myself out but don’t earn anything for years, then work incredibly hard for an irregular income for the next few years and finally hit the jackpot when I sell the business to someone else.
That’s why a few years ago I decided to do things differently. Instead of starting another business, I’d let someone else start the business, invest the capital, prove the concept, do the marketing, build up the client base and work seven days a week for three years.
That’s phase one taken care of.
Then when the business enters phase two and the irregular and unpredictable income takes its toll, and the business owner starts to feel like giving up, I enter the picture as The Dealmaker.
I help the business owner by bringing fresh energy and new ideas to his or her company. And, of course, I help by bringing the capital. I buy the business, or a large share of it, as an investor, not an owner-manager.
There are numerous deal structures and methods of financing business acquisitions that don’t require any of your own money or using your house as collateral.
Best of all, investing in someone else’s company means you can leapfrog both the start-up phase and the hard-work phase.
The role of The Dealmaker is to add value by coming in with a fresh set of eyes and spotting the missed opportunities and the wasted money as well as to keep management focused on the big picture.
Usually, business owners sell you equity with pleasure, delight and relief because they are really struggling and they know you can take their business to the next level, Phrase Three, the exit.
Now, I have massively simplified the process and ignored all the nuances of putting together a deal like this, but look at the advantages:
- No start-up phase
- A business model proven by someone else
- None of your own money risked
- No day to day management of the business because although you are a shareholder, you are the ‘’
You invest only the positives – ideas, energy, enthusiasm and a clearer strategy with the benefit of being able to see the wood for the trees.
And you can share in the upside and help the owner engineer a profitable exit for both of you.
In other words, you can still have all the emotional pleasures of owning a business, without the stress and anguish of the will it work/won’t it work phase.
You can still help it to grow and have the satisfaction of its success but without having to deal with staff issues, admin or customer service.
You can be a business owner of a ‘ready-made’ business without the financial risk, but with all the upside.
So that’s why I’ll never start another business from scratch again. Why would I?