Continuing my series of blogs on common mistakes made by small business entrepreneurs, today I turn my attention to entrepreneur rewards and in particular the danger of settling for smaller rewards than the risks justify.
It was Business Growth expert Mitch Axelrod who defined an entrepreneur as someone who works 80 hours per week for themselves to make sure they don't have to work 40 hour per week for someone else.
Are You Settling For Entrepreneurial Rewards That Are Too Small?
Are you getting the financial rewards from your business that you should be for everything that you invest into your business:
- Your time and effort which are likely to far exceed that of any employee,
- Your entrepreneurial ideas and the fact that you are probably thinking about your business in many of your hours awake,
- Your money that you invested in the business,
- The extra financial risks you take through personal guarantees,
- Your personal sacrifices and family where the demands of your business cause you to delay put your business first,
- Your future - I know that I am unemployable and would hate to ever have a boss again
Please Answer These Two Questions
- Do you earn less (in salary, benefits and profit) than it would cost to pay other people to do the work you are doing to the same standard?
- Would any investor accept the returns your business generates after paying you a fair salary for the work and hours you do as the business chief executive?
If you answered "No" to either of these questions about the rewards you receive as a small business entrepreneur then you need to stop and take a good hard look at your business.
Is Your Small Business Destroying Value?
If your business can't afford to pay market rates for you as the manager and you as the entrepreneur and investor, then something is going wrong.
The business is destroying rather than creating value. It is taking your inputs and turning it into lower outputs than the market expects.
Even worse the business is consuming you in the process.
Tell yourself that your business must pay its way and take the responsibility for how you can build the business to deliver the returns.
Calculate how much you should be earning as an employee and the shareholder/financier.
Add the two numbers together and that's now the minimum you should be working towards.
Now calculate what that level of entrepreneurial reward means in terms of sales, customers and leads and set short term targets to get you to that level.
Then identify the actions which will take you to those goals.
Beware The Expectations Trap
I believe that too many small business entrepreneurs fall into a trap and it is likely to happen even more as the economy turns tough.
You know that things are difficult so you expect to make less money and you lower your expectations on what to expect.
The other approach is to refuse to go down quietly and instead identify how much you want to make, calculate how much you are likely to make in the current circumstances and then create a plan to close the gap.
This is one advantage that big business has. Subsidiary company management with profit responsibility have to live up to the profit expectations of the group management.
Their assumptions are challenged and if they fail to deliver profit and cash, they are held accountable and often replaced.
Because you are your own boss, you have to carry out both functions to ensure that you receive all the entrepreneurs rewards you should expect.