Have a question about a small business topic? Let our resident expert Chris Griffiths take a run at it. E-mail your questions to firstname.lastname@example.org. Confidentiality ensured.
The question: I am a working professional with a substantial income and have grown a small business on the side. It’s growing by double digits, but at roughly $600,000 in revenue per year, it’s not big enough to replace the income from my job. Furthermore, I worry that it won’t keeping growing with only my part-time attention. How do I bridge the gap?
The answer: Congratulations on your continued success. Of all the problems there can be in business, yours is amongst the most exciting. Many people who start businesses full time never grow it to the level you have already achieved, I’m guessing there is a lot of potential here.
The bad news is that taking your part-time business to the next level requires full-time work and/or financial sacrifice. If you’re not prepared to jump in with both feet, you are going to have to find someone who will.
One option is to form a partnership with someone who has management experience in your field. This partnership does not mean you have to give up full control, but I would think you would need to offer some sort of equity position in addition to a fair market value salary and compensation plan. You will also need to be willing to let this person take control of things that you would normally be involved in. They will make mistakes. They will make decisions that you may not have made in the same situation. This will be difficult. However, if you find the right person, they can help get you where you need to go.
If giving up equity feels like it is too much of a commitment, you could offer profit sharing that behaves like equity. This way your president gets a piece of the upside as the company grows, and profits increase. These profits or bonuses could vest over a few years so you know they are not looking for a quick, one year pop that doesn’t have the long-term interest of the business in mind.
In either of the options above, you will want to make sure you have a balanced and well thought-out partnership or employment agreement that clearly outlines what happens when things go well and if things go poorly.
Another option is to pool your personal and business financial resources and get enough capital to cover your minimum income requirements and then go full time. This is the only way you will really know that you gave it all you got. If your business is profitable and growing with only your part-time commitment, you would think living and breathing it for a year might get the business a lot closer to replacing your entire income.
If it were me, I’d be more worried about never giving it my best shot and having it falter – I’d always look back and say, what if?
After all, if you don’t believe in the business enough to give it everything you’ve got, it may be hard to convince a partner or investor to risk their career and money. If all else fails, could you go back to your original job?
Last, but certainly not least: You could sell the business. You have built a profitable, growing concern while working on the business only part time. Maybe there is someone out there will a similar technical skill set as you, who is retired or looking for a new adventure? Your business has positive cash flow, a customer base, location, systems, relationships, supply chain, etc., all ready to go. That’s worth a real premium.
If you can’t bring yourself to leave your day job, you might consider selling and tucking away the proceeds for a new start-up later down the road when it is a better fit for you personally.
One thing is for sure, if you keep doing the same thing, you’ll be lucky to keep getting the same results. Eventually, competitors with full-time entrepreneurs at the wheel will take your market share and you’ll then be left with a stagnant business that needs to be sold at a compromise or revived from a position of weakness. Consider the options above and take action towards you chosen path now.
Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.