Before you start your business, choose the level you want to play

There are four types of businesses. Deciding the level you want to play at is key.

In the second of a three part series, serial entrepreneur and investor Josh Comrie explains why choosing the level you want to play at before you invest in building a business, is key.

At least two or three times a month, I have the same, typical conversation with a friend, associate or acquaintance wanting business advice. We’ll call them a ‘Wantrepreneur’ or WP for short, using Seth Godin’s term for someone keen to break the shackles of salaried employment.

WP: Hey Josh! I’m keen to make my side gig my fulltime thing / start a business. Can you give me some insight on how to move ahead?
JC: Sure. What are you trying to achieve?
WP: Well, I have an amazing idea for a new swipe app. It’s like Tinder for the over 60’s, to enable grey power to get back into the dating game.
JC: *In head – wowsers* Ok, that aside, what do you want to achieve?
WP: Ummm… To get Grandad lucky again!
JC: Right, I get that! But I mean you – what are YOU personally trying to achieve?

Can you complete this sentence: “I’m starting this business because…”?

This may or may not surprise you – many people I know and have met over the years don’t actually consider what it is they want from the business, until a year, three, five or however many years into starting the business.

Why’s this a problem, you may ask? Well, if you don’t know what you’re trying to achieve, you may end up with something you actually don’t want or enjoy…

In my eyes, all business owners fall into one of four categories – the lifestyle business, the operator, the owner, or the entrepreneur.

They’re all equal but one of them will be the best fit for you, even if it’s just for a season. It may change, but it’s contingent upon your situation.

1) The lifestyle business

As the name suggests, it’s just that – a gig (whether it’s on the side or the sole trader) that takes up 1-15 hours of your week.

You’re more focused on the experience and ensuring it doesn’t complicate the rest of your life, rather than it being the thing that consumes it. (The rest, other than, perhaps the entrepreneur, will allow themselves to be engulfed – trust me.)

You do it for cash flow, fun money and maybe to see what it’s like to have another gig. It’s highly likely to just be you in the business.

2) The operator business

This ranges from a self-employed tradie, right through to a business turning over $5m or so per annum.

The key here, is that you’re the centre of this business – it lives and dies by you, and you won’t have a business if you’re away for more than four to six weeks. It’s the wagon wheel concept – you’re the hub, and your team, partners, suppliers, etc are the spokes. It all relies on you.

These businesses can be immensely profitable; the first services company I founded was like this. I loved it, but I didn’t have a holiday for four years. It was a great business that was returning me up to $1m personal income per annum, but shit, it was tiring.

3) The owner

Now you’re living.

This business has a management team, possibly a board, and you’ll have multiple offices, product or service lines. Change will be more difficult and communication will have become a challenge. Cash flow is critical, as your expense base is so high and unfortunately, so will be your stress levels.

Whilst you don’t need to be there day-to-day, the business really does function best while you’re around. You may be about to bring in a “Manager” – the person who’s not you, to run the business. Or you may have tried and failed to do this already.

The single toughest hire you’ll ever make, by the way, is the one to “replace” you.

4) The entrepreneur

This is potentially the pinnacle founder, but also the one that requires the most experience.

There are so many lessons I learnt while going through the operator-owner-entrepreneur journey, and I know how hard it can be to leapfrog.

This business type is one truly started with a very clear end in mind. You are a cog in the machine from the outset, not the machine itself. You constantly look for ways (and people) to remove yourself from the business – you may not even work in it everyday. You’ve planned your personal exit for a long time, and have clarity around who your stakeholders are and how to serve them from the outset.

Decide before you start

“Why don’t I just start playing at the ‘entrepreneur’ level then?” you ask? Well, you can, and if your desire is to have a super focused period of time in that business, running like hell towards the objectives before exiting – then do it.

You’ll probably carry the most risk, however, as you’ll be scaling fast, taking bigger bets, and loading the team with specialists from the outset.
Negative cash flow, debt, fundraising, etc are all hallmarks here.

If you want a small, lower risk, job-oriented business (which is a great business to have), work out on day one which of the first three categories you want.

This can grow and change over time. But don’t end up like too many people I know – feeling stuck with a seemingly great business but one they hate as they didn’t know what they really wanted from the outset.