Misconceptions About Owning a Business
The Illusion of Ownership and the Shackles of Responsibility
Most of you are entrepreneurial in spirit. Maybe you are running your own business right now, providing value through your specialty or profession (your technical skills), and perhaps at the point where you'd like to make an exit or dental practice transition.
This is the point where you want to buy back the time you sacrificed to create your business, accumulate a nest egg, and provide for your family.
Or you may not yet have your own business, be younger in life, and currently working as an employee. That’s okay. That's how I started 43 years ago. I did not start out as a business owner right out of the gate – after obtaining my dentistry licensure and education.
The following is for all of us who want to get into business, are in business, or want to leave the business.
Why Do We Get Into Business in the First Place?
We want to be in charge. We want to be our own “boss”. We want control of our own destiny. That is, in essence, the entrepreneurial spirit.
However, in starting a business, you’re not really in control. It’s really just a change of position from employed to self-employed.
Being self-employed, you are in charge. BUT you have many external forces that you have to answer to or be in compliance with. You trade in one boss for several others. The federal government is a boss. Compliance, regulations, and HR are a few others. Even customers, clients, and patients are effectively your “boss” because if you don't toe the mark and meet a certain caliber of standards of services or products that you provide, then they choose to go elsewhere.
So, being self-employed does mean you are in charge of your future but there are many constraints that make it not as freeing as we thought.
Ownership is a Responsibility
We went into business or in our profession because we wanted to have Freedom. We wanted to have security. Peace of mind. The option to forge our own path forward. That’s what defines us as entrepreneurs, as capitalists – that desire for freedom.
The misconception is that owning a business will give me exactly what I want instantly. That is not the case. Starting a business comes with a lot of responsibility. It also comes with a lot of risk and liability. Those who have been in business longer have come to understand this.
There are some days when you just come home and say, “Boy, if I could sell that business tomorrow, I'd be out.” I hear stories all the time from colleagues, dentists, and other business owners. I’ve been there myself. Unfortunately, the opportunity to exit usually doesn’t come when we want it. Usually, we have to row that boat longer.
I want to lay out our thinking and the process for obtaining a business because we start with so much promise, but somewhere along the way we lose our drive, our vision, and the momentum to obtain that freedom we desire.
Society’s Linear Path to “Success”
We don't just fire up a business or get handed a license to go do something. We have to invest in ourselves first. We go through some level of education or training. That takes time, depending on how high up the ladder you want to go to gain those certifications.
Oftentimes, today, that education comes with a larger amount of debt – student loan debt.
Whether or not it is worth it is a topic for another day but you are investing in yourself in those early years. And that's where it should start.
With the necessary education/training, you then start providing a service or product to a community, a certain type of customer/client who will then pay you for the value you provide. The greater the problems you can solve, the greater your services will be wanted and the more you get paid. That's how we typically start to go up the income ladder. That's also the goal at the beginning, more income.
We often incur more debt to establish our business. More debt is not bad. I'm just saying that's the way I did it and the way most people have to do it.
At this point you’ve invested in yourself by working hard, studying, and creating the talents and skill sets you have and combined that with a business platform. Mine was dentistry. I leveraged not only my skill set but others’ (employees and associates) time and skill sets in a mutually beneficial way.
By leveraging in this way, I’m providing a service to more people at a greater volume. I’m able to create more value and therefore increase my income and have business growth. That's another goal and where we can address another misconception about owning a business.
The Consequences of Growing Your Income, Lifestyle, and Business Without Purpose
For the majority the goal for their entire working career is to increase their income and grow their business. Growth for growth's sake. This is often caused by the increase of our lifestyle alongside our income.
Yes, increasing one’s lifestyle is a plus and should be part and parcel of you working hard. The problem is most people ratchet up their lifestyle to match or surpass what they can produce in income. Now you are treading water, having to work hard every day just to keep yourself afloat.
I’ve met so many people who get stuck in this mode no matter how high their income is.
And treading water is exhausting, especially when there is no possible exit in sight.
This responsibility to keep working hard for your chosen lifestyle is what I call “the golden handcuffs”. Golden handcuffs to a business you created through your hard work with the keys to your freedom thrown in the gutter. This is where most business owners stay for most of their life and where the most significant misconception lies – that treading water and the golden handcuffs is all there is to business ownership.
The Key to a Business that Provides Income AND Freedom
The question to ask yourself is: Is your business allowing you to have the freedom that you desire?
For most people, the answer is no. They stay trapped in a growth cycle, increasing their income, then their lifestyle, then their business, and it starts over and over. This can last for many years, giving up their time and opportunity for the life they want, before finally exiting late in life. Your business had a different purpose at the beginning – freedom, options, control.
But you don’t have to wait for that mystical day somewhere down the road in your 60s when you finally have the opportunity to “retire.”
For all those reading this (young or later in life), You don’t have to go down this road, you can get out of this trap. Some of you are mid-career and still have a great opportunity to change this.
It all centers on the purpose of your business and the intentional control of your lifestyle. Don’t let your lifestyle grow even close to the income you are producing. Set a limit way under it.
In regard to the extra profit I spoke about earlier (once you have a profitable business), what you do with it matters. You can decide to invest it into assets that will produce passive income, eventually growing it to surpass and replace your active income – this is a topic I’ve expanded on in other blogs.
Traditional retirement planners advocate for locking that extra capital into retirement accounts (sold as a way to lessen the pain of large tax bills – it is at best a short sighted effort, kicking the can down the road). The problem with that strategy is that those funds cannot be used to create any meaningful Freedom before a distant retirement age. I have spoken with too many docs in their 40s and early 50s who have diligently worked hard to accumulate wealth, only to realize that they cannot use that wealth to buy back their time for many more years.
Strategic investment in cash-flow-producing assets with the goal of creating enough sustainable investment income to allow for financial independence from the need to trade time for dollars in the practice is the key.
There are often also opportunities to reinvest that profit in your business. You can do so in a way that will free up more of your time. Perhaps you hire an associate, step back from implementing your technical skills, and apply other skill sets on the business that create more profit for less amount of your time. I’ve spoken on these topics on my podcast.
These two areas, your lifestyle and business, can be a vehicle for the freedom you desire or the never ending trap most fall into.
All of this requires intention, discipline and effort. But with the right Blueprint real, meaningful Freedom can be achieved decades ahead of the traditional “retirement” average. How much would it be worth to you to create more choices and options regarding how you spend your time now – not some distant date in the future? Freedom should be achieved while you are still young enough to enjoy it.
Exiting Your Business – Dental Practice Transition
Lastly, for those in their 50s, approaching 60s, looking for an exit: I want to leave you with a word of caution. How you handle that exit for your practice or business is going to be critical to your future and your freedom. It is pertinent that you spend time now focusing on how to maximize that transaction and transition. I can talk more about that another day.
To your freedom!
P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :
1. Schedule a Call with My Team:
If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest. www.freedomfounders.com/schedule
2. Become a Full-Cycle Investor:
There are many self-proclaimed genius investors today who think everything they touch turns to gold. But they’re about to learn the hard way what others have gained through “expensive” experience. I’m offering a free report on how to become a full-cycle investor, who knows how to preserve and grow capital in Up and Down markets. Will you be prepared when the inevitable recession hits? Get your free report here.
3. Get Your Free Retirement Scorecard:
Benchmark your retirement and wealth-building against hundreds of other practice professionals, and get personalized feedback on your biggest opportunities and leverage points. Click here to take the 3 minute assessment and get your scorecard.