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You Want to Build a Better Business, Pt. I

This post is about the motivation and mindset. Part II is about how Origami can help.

In 2020, according to Innovation, Science and Economic Development Canada, just 1 percent of small and medium-sized enterprises (SMEs), sought equity financing. This fits with our experience at Origami. Very few small businesses raise money through shares sold to arms-length investors.

That's because small businesses rarely have the growth or market potential to attract other people's capital. Capital chases returns. It's not that there are no returns to be had in small business. It's that there are usually not enough for both owners and investors.

Success in small business is mostly personal success, as failure is mostly personal failure. The owner works hard, the business does well, the owner benefits. The owner works hard, the business doesn't do well, the owner pays the heaviest price. There's not enough left over in the success scenario to interest investors, especially given the business doesn't do well scenario is much more likely.

So, to finance their businesses, small business owners have to put up their own capital, either directly from their savings, or borrowed (with some form of guarantee) from friends, family, or commercial lenders. Owners put up the capital and take the risk — to earn the reward. It's important to remind yourself of this (constantly, because it gets lost in the day-to-day, month-to-month grind of keeping a small business alive and kicking). Let us do the reminding then:

  • Your small business is almost certainly your number one investment in time and money.
  • You're investing that time and money, you're risking it, to earn a reward.
  • The question you have to keep asking yourself is: Are you earning the reward?
  • And, if the answer is no: Will you?

One of the benefits of not taking other people's money is you don't have this constant pressure to make progress, build the business, and produce financial results. You're your own boss. You don't answer to anybody. One of the drawbacks of not taking other people's money is you don't have this constant pressure to make progress, build the business, and produce financial results! "You're your own boss and you don't answer to anybody" is also a problem as it turns out.

Like most of us, you're not wired to push yourself or hold yourself accountable. Nature doesn't expect that from you; for the most part, it programs you to avoid dangerous situations and conserve energy. It's society that creates expectations. While you're growing up and while you're working for someone else, you have clear paths and rules to follow and people around you to make sure you follow them. Outside forces set standards, keep you in line, and hold you accountable.

In the case of small business, society doesn't really have any expectations or guardrails. There are lots of small businesses. They come and go without much fanfare or notice. Individuals have the right to exist; businesses, and particularly small businesses, don't. Short of illegal activity, society doesn't care what any one of those small businesses does or doesn't do, becomes or doesn't become. You, the owner, you're the one with something at stake.

No one knows how much you're making either. If you're a mechanic or a plumber or a lawyer, other people in your industry have a pretty good idea — everyone else has a rough idea too. No business owner I've met wants to tell anyone they haven't made it yet — particularly because everyone thinks you have. It's up to you. You have to chart the path, set the expectations, and create the guardrails. You have to rewire yourself a little bit.

You always feel the short-term time and financial pressure in your business: client deadlines, making month end, product, customer, or employee issues. It's the long-term pressure that goes unnoticed. But just because it goes unnoticed doesn't mean it goes away.

The less money you make from your business now, the less you'll have to save and invest for later. You may not feel it now. You may feel positive about your chances in the business. But, unless you convert those chances to results that make up for your early sacrifices, you'll really feel it farther down the road. You know, when your friends with steady, regular jobs are paying off their mortgages and talking early retirement. Money compounds, and money made earlier compounds more than money made later. Time and money together are magic.

Time is magic in another way: It disappears. Two, ten, twenty years go by, whether you're building a better business or you're not. The difference is that, in the first case, you'll have something to show for the time spent, and, in the second, you won't. If you don't succeed in building a financially strong, successful business, the time (and money) you've invested into it will be gone. Nothing will have been accomplished. Other than being there and some tough life lessons.

So you always want to be working on building a better business, even if you feel you're doing well (tomorrow isn't promised) and especially if you feel you're not (tomorrow arrives soon enough). And, when you've tried, and the business can't get any better or keeps getting worse, then, yes, take it out back. The business is a failure. You're not. You don't need to go down with the ship.

What is a better business? It's better if it's financially healthier: more sales, more profits, more cash in the bank. And it's better if it's paying you, the owner, more in total compensation. When it comes to small business, that's it. That's everything. Everything you do is with those ends in mind. The big question is: How do you do it? How do you build a better business?

At Origami, we have a simple system to guide your efforts. More on this in Part II.