How to have a win/win financial relationship with your business

A while ago I wrote a blog called ‘your business is not your baby’ where I talked about the importance of treating your business as a separate entity, not as an extension of your family or personal life.

Today in one of the rich and frank Master Moves group discussions, this important distinction came up again.

The conversation came about as a business owner shared that they had been ‘stripping’ money out of the business to fund other projects. Another business owner agreed they had done the same. Which was all well and good until an external factor impacted on revenues, causing an instant and significant drop of income. Then the lack of cash reserves in the business became a problem.

Suddenly he couldn’t pay his contractors on time, and became stressed about their well being as like all business owners, we are always conscious of our responsibility to those who rely on us to make good decisions so they can feed their families and pay their mortgages.

So is it wrong to take the cash out of your business as you go?

My answer is a resounding ‘no’ – it’s not only not wrong but it is important that you do so.  Why would you wait until the end and hope you get your ROI on all your efforts from a sale?  When you can be taking money out as you go and investing it elsewhere, thereby growing your wealth outside of the business at the same time you are growing the business.

But it is critical to do it strategically and in a way that makes your relationship with the business very clear and works for the business as well as you.

Here’s what I shared about how my business was set up and how I learned to have an appropriate relationship with it.

Your business is a separate financial entity and as such needs to stand on its own two feet.  It needs to raise it’s own finance when needed.

It has a responsibility to make enough profit to be able to pay dividends to its shareholders, to give them a fair return on their investment.

It is the job of the CEO to ensure the business performs well for its customers, its staff, its community and also its shareholders.

As the owner, you are the shareholder.

But as an owner operator working in the business you are also the CEO.

It’s good to remember you have two hats – The CEO and the shareholder.

As a shareholder you have every right to expect a dividend paid out of profits

But only if as a CEO you have met the targets and expectations of the business to ensure there is enough capital to do three things:

    1. Allocate a reasonable % of profits to be working capital left in the business for growth and risk management
    2. Allocate a % of profits for profit share/bonus for the key people who have helped achieve the profit
    3. Allocate a % of profits to be declared as dividend pay out to the shareholders

This is how my business was set up and it worked really well.  I was on a salary paying PAYE, that was all I took out of the business until profits were finalised. Then I would receive the agreed % of profits after a capital allocation was made to fund growth and have reserves for tough times, and after key staff had been given a profit share bonus.

The key to win/win

The key really is to always view your business as a separate entity – your job working inside the business is to make sure it’s financially successful so that it can pay you a return that you can use outside of the business.

Take money out yes.  But leave enough money in to feed the business when it needs it… and this my friends is a win/win for you and your business.

I hope that makes sense!

PS. Conversations like this happen all the time in the Master Moves community.  To find out how to join us, hit reply to this email and I’ll fill you in!

Master Moves is a powerful group programme for business owners who really don’t want to keep playing the game alone.  Find out more here. 

Founder Syndrome – what is it and do you have it??

Founder syndrome is a thing.

And if you own a business, it’s most likely that you are suffering from at least a few of it’s symptoms.

The following blog is based on my own experience of owning and exiting 2 businesses and the experience of over 100 business owners I’ve worked with over the last 11 years as a business mentor, with individuals and groups.

So what is Founder Syndrome?

I believe it is a fundamentally a very real blockage to the growth of any business which is a direct outcome of the human condition of ego.

Cambridge University definition of ‘ego’ below:

Ego: the idea or opinion that you have of yourself, esp. the level of your ability and intelligence, and your importance as a person.

When the founder of the business struggles to let go… at any stage of the business, it is because they have a very real commitment to the idea that the business cannot do something without them.  And in many (dare I say most) cases the things the business ‘cannot do without them’ are functions that in reality can be fulfilled adequately by others – with the right organisational growth plan, the right people, the right systems, the right training – and importantly, the right mindset from the founder.

Why is Founder Syndrome a problem?

If a business has an owner who continues to work hard within the operational functionality of the business, it simply is unable to grow. The reason for this is that the business owner is most likely to be the person who can direct and lead the business to greater things, but only if they have time to do this.

If they spend their time working on lower level problem solving, such as getting an urgent job out the door, they are not spending time on high quality problems such as how do we improve our competitive edge, or position ourselves to improve the quality of our client portfolio, or ensure we are well positioned to take advantage of a trend that’s hitting our industry?

What is the right mindset to avoid Founder Syndrome?

If you as the owner of your business are spending much of your time working operationally in the business – and you are a core feature in the delivery of your service or product – it’s likely there is a mindset belief driving this behaviour.

You may believe one or more of the following:

  • You are the only one with the right experience, knowledge and ability to fulfil this function (whatever the job is that you are getting involved in)
  • The standards and expectations of your clients will not be met if you don’t get involved
  • The business is in danger if you don’t get involved
  • Your current team can’t be trusted to deliver your offer without your involvement
  • Your clients want you working on their business and will be unhappy if you get someone else to do it
  • You can’t afford to hire more experienced people and you don’t have time to train your more junior people
  • The best use of your time is to be involved in many aspects of delivery of your business offering

How do you change the mindset?

It isn’t easy to change mindset.  But it is necessary if you truly want your business to grow.  To want to change your mindset you have to believe the following:

  • The growth of the business is capped by your willingness to let go and trust
  • There is always someone who can do ‘things’ as well as you
  • Your team are more capable than you might think
  • It’s OK if people make mistakes as long as they can learn and grow from them
  • Your clients/customers will accept others working on their business – they don’t really believe you should always do the work
  • Systems, protocols and training will set you free

Actions to take to shift mindset

  • Shift your priorities from ‘doing’ to ‘leading’
  • Write yourself a job description as CEO or MD of your business and make the role of CEO/MD as important as doing the day to day work – set yourself KPIs based around business development, strategy, leadership, networking, reputation building – and have someone (maybe a mentor or advisory board) hold you accountable to these KPIs.
  • Work with your team to put the systems and protocols in place that will enable them to take on more responsibility in way that gives you reassurance that things will be done to your standards
  • Be clear on your expectations and take responsibility for communicating these to your team

Free freedom from founder syndrome session

If you own a business and would like to talk about founder syndrome and how you can shift your mindset to enable growth, reach out to me for a a free 30 min pep talk on how you can shift it faster than you might imagine!

Just email me to book a time.  Or click here to make a time in my calendar.

Yours in freedom!

Posted in All