Qdosology Blog

When people ask about your work, do you begin by saying something along the lines of “Well, I run my own business” and then elaborate on the actual purpose? For those of us who’ve courageously stepped off the rodents’ wired device, it’s a good feeling isn’t it? But - and it’s a big ‘but’ - are you really a business owner? Pause for a moment and think about this one, before denial kicks in.

I’m not saying you’re not ‘in business’, however, self-employment and business ownership are at vastly different ends of the spectrum.

In fact, making the transition is one of the hardest aspects you’ll ever face; far harder than starting up in the first place. Growth, or rather mismanaged growth, can hinder or even derail your dream even though appearances suggest all’s well. Primarily because, for the majority of self-employed people, letting go and trusting others doesn’t come naturally. Yet without help, your efforts have capacity and profit limits as well as a ceiling on effectiveness.

So, what do I mean when I say “self-employed”? I’ve been clarifying this for many years in my advisory role, but aside from any official designation (HMRC IR35 and IR56 victims look away now), the clearest explanation I came across was in more recent times, in Michael Gerber’s The E-Myth Revisited. In essence, if when you stop, is when the money stops, then you’re self-employed. For how long could your business keep running without you and still be there when you got back, better than before you left? That’s a measure of true business ownership. Gerber tells you what’s going on and what to do to put it right. He confesses he doesn’t tell you how. I get consulted on the “how”.

The more dependent it is on your direct involvement - fundamentally doing the job by working ‘in’ it, rather than ‘on’ the business  - the less likely it is you’ll achieve what most of us aspire to in the first place: time, creative and financial freedom. The irony is few employees ever achieve that, because they’re motivated more by the need for security than they are by what fuels the person who is better suited to self-employment: fiercely independent-thinking perfectionism. Different comfort zones. Yet, all that happens to the latter is 80-hour weeks and nominal heed to the axiom of sanity: the third’s rule. A third of profit goes in tax. A third is yours. The remainder is to reinvest in the venture to grow it. A disturbing percentage of clients’ I’ve met over the years were barely generating enough to pay themselves anywhere near what they commanded in a paid job, never mind the tax bill. Of course, they cite the usual attractions of not working for someone else which between the lines translates as “I’m doing it my way. That makes me happy”.

Bluntly though, you’re gambling in a game with loaded dice. The odds are, your health or your wallet/purse will give out before you do. Your pension plan? Forget about it. Too many these days are forced to keep working because without them there’s no business. In fact, this is the real reason Dragon’s Den contestants don’t get their money. I know this because I’ve been approached by the tv companies and some of my clients have appeared on the show. The smart ones don’t get past auditions. It’s about what makes good entertainment, not what makes a good business.  That said, if it’s all in your head and you get hit by a bus, where’s the business?

Up to now you may be assuming I’m only referring to owner-managers, those without any staff at all. Think again dear reader. Far from it. I meet many business owners who are deluding themselves. They have employees. They point to the bricks and mortar, the busy-ness,  the customers and tell me, “see Michael, I run a business, I’m not self-employed” Trouble is, no-one can go for a pee without the owner’s permission. Any paper/electronic audit of accountability runs straight back to inside the owner’s head; not much is ever written down. They take a (rare) holiday and no-one can make a decision until the owner gets back.

Facts:

• Out of 60 million people in the UK, 26 million of us work for a living
• Where we work, other than in the public sector, is in 4.3m businesses
• 4 million work for themselves (that means around 15% have no employees)
• 20% have less than ten employees.
• Corporate Britain is a myth. Only 8,000 companies - out of 4.3m - officially meet the criteria: 250+ employess and/or £5.6m turnover (but, they hold a lot of power when it comes to leveraging red tape on small business. After all, what’s the one thing a big business does not want? Competition. It’s not going to stand for big business being taken away from it…)

This also means 85% of people prefer to work for others. Sure a few of ‘em wish they were their own boss, but haven’t as yet taken the plunge.  However one key factor is this: the majority of people think you’re nuts. And you think they’re crazy.  You don’t speak the same language. When it comes to recruiting, the independent perfectionist tends to look for someone like themselves. Professional suicide. The outcome is you fight with each other all day long, they end up nicking your ideas to set up on their own, while you go off to consult your solicitor muttering at the slightest provocation that you can’t trust anyone these days. So, you plod along bitching that you have to do it all yourself. The second irony is that there are 85% of people who don’t think like you, which means it’s actually easier to find the right people to help.

The problem is this. Independent perfectionists are prone to being devout control freaks. Or, well on the way to adepthood. In Part two, I’ll say more…                                        

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