Quick anecdote to kick off today’s post.
In a small town in the midwest there are two plumbers: Jim and Jason. Both are 50 years old, and both are married with two kids who will someday go to college.
Jim and Jason are both great at their trade. They are available when needed, charge a fair price for stellar work, and are well liked in the community. They have the exact same number of customers in any given year, and both produce the exact same amount of revenue.
Their interest in building their respective businesses is where they differ. Not from a revenue or growth standpoint, but from an operational standpoint. Hiring & training support staff and new plumbers. Systematizing and building process efficiencies. Jim is hell bent on streamlining his business in an attempt to organize & simplify his work. Jason is uninterested – he cares more about the customers and the work, and doesn’t mind when his professional world is hectic.
Now let’s fast forward 15 years. Jim and Jason have brought in the exact same amount of revenue over the last 15 years. But Jim has been far more efficient with how that revenue has been distributed. He has systems, procedures, and operations built out to where his only duty is jumping in the car and driving out to see his customers. Because of that he’s been free to spend more time with his family, and has packaged his business in a way that’s attractive to buyers. He could sell to his employees or another party, and reap the value of the enterprise value he’s built. The funds will contribute to his lifestyle in retirement.
Jason is ready to retire, but hasn’t been able to squirrel enough funds away to stop working. He’s not been able to delegate much of his work to employees, and has virtually no systems or processes in place. He realizes that in order for someone else to take over his business they would need to spend time – at least a year – working side by side to understand how he has everything set up. Jason’s had to work twice as hard to produce the same revenue as Jim. He’s enjoyed far less time with his family and his health has suffered.
It’s not surprising that a tightly run business creates more value. What is surprising to many small business owners is the fact that failing to tighten up operations could be the difference between capitalizing on years of hard work by selling versus walking away with nothing.
Which gets us to the point of today’s post: your business is an investment.