Is your contracting business really a life style?

I had not heard of the term “life style” business until T. Paul Thomas, a business professor (and “serial CEO”) at Northern Arizona University, emailed me one of his recent “Ask the CEO” columns for a Flagstaff, AZ newspaper.

I realized that many of us in the Canadian Contractor community look at our businesses as “life style” ones.

Would we operate differently if we changed our thinking? Perhaps we don’t want to – and that’s fine, too.

Here’s the column…  Your comments welcome, underneath the article.

“Ask the CEO”  

by T. Paul Thomas

Is your business really a life style?

I think every entrepreneur dreams of taking their idea to a start-up and then changing the world with the start-up as it grows to a successful organization (usually measured by higher revenue, profit or employees) . What I continue to be amazed by are the number of start-ups that actually turn into life-style businesses for the wrong reason.

Don’t get me wrong, there is nothing wrong with a life-style business. Life-style businesses produce great products and services and employ lots of people in the world. But they will never really change the world or end up on the Fortune 500 annual list.

What changes during the start-up phase?

Last month I met with the CEO of a successful start-up that had hired their first sales executive. As I was talking to the CEO she explained that after 60 days the new Sales VP had dramatically exceeded her expectations. As a matter of fact June was on track to be 2-3X what June of 2015 was.

I spoke to the Sales VP and asked him what was the reason for the sales growth. To my surprise he explained that the sales could be twice as much (so over 500 per cent growth) if only he had inventory. Can you imagine getting requests for product only to tell the client, “I’m sorry but I’m out of inventory”.

When I brought this up with the CEO, she explained to me that she was concerned that they were growing too fast and too soon. She was starting to question if her organization could really handle being much bigger than it already was. She said, “I’m afraid I can’t afford this”.

Don’t let fear restrict your growth

Two weeks ago I met with another founding CEO that explained how their new idea has “taken off” and they had already reached the revenue in the first four months of the year that they had projected for all of 2016. As I dug into the business I was surprised to see they weren’t using a popular distribution channel for the products they sell. The CEO said, “I’m afraid to try them. I’m not sure I could keep up with the demand.

What do these two real world examples have in common? They are both holding back their companies out of fear, uncertainty and doubt. Both organizations are successful by anyone’s measures and both are being treated like life-style businesses.

Again, there is nothing wrong with that. The companies both employ more than a dozen employees and they provide wonderful products. If the CEOs are making conscience decisions to stay a life style business than that’s great. But in my two examples that is not the case. Both are holding back their companies out of fear. They fear they won’t have enough money, they fear they won’t have the right inventory, they fear this employee will leave or that some unknown competitor will show up.

Be paranoid, but not afraid

The late Andy Grove wrote a book titled, “Only the Paranoid Survive”. It is a wonderful book that every business owner and entrepreneur should read. It tells the reader that change is constant and you must always be vigilant, and prepared to evolve. It doesn’t however say anything about being afraid.

Be honest with yourself… and your employees

I worked with a company years ago that had been around for more than 10 years. The founder would tell you that his company was a leading tech company and that it was going to change the world. When in fact it was a life style business because the founder was afraid of ever giving up control. He believed no one could code, sell, market or represent the company better than him.

Regardless of the age of your business, until you as the owner, founder or CEO come to grips with what your organization is, you will be stressed and miserable. Just make a decision. Either grow the business and don’t allow fear, uncertainty and doubt rule you, or decide to have a life style business. Both are the right decision. Making no decision and sitting in the middle is the wrong “no decision” and it will make you an unhappy camper.

T. Paul Thomas teaches business and entrepreneurship at Northern Arizona University, serves as the CEO of the Northern Arizona Leadership Alliance (NALA) and is the Chief Entrepreneur at the NACET Accelerator. Prior to joining NAU in 2013, Paul spent 25 years as a “serial” CEO and president. Paul can be reached at thomas.tpaul@gmail.com