Just Buying a Job, Or is it Business Opportunity Investment?
Is that business opportunity you are considering a real investment or just an example of buying a job? The distinction between the two often is unclear.
But it's important for entrepreneurs to consider this question when establishing criteria for the search, and when becoming educated in order to make smart buying decisions.
As a guide for determining whether you're buying a job or purchasing something more than that, consider these three principals that shed light on the topic and clarify some of the issues involved: 1.
Level of owner's involvement: The seller may claim the offering is a terrific business opportunity with wonderful potential, but if his or her full-time participation is necessary to make the company run, it looks a lot like a "job.
" Being tied to the kitchen, or office, or retail counter for much of the day, during business hours, is pretty much the same experience whether you own a business or labor in someone else's company.
It's nice to think: "this is my business, I can do whatever I want.
" But the reality is that the person who has left a job for a business that's just as demanding of daily attention may not have made much career progress--may have bought a job.
2.
Return on investment in absentee business: The entrepreneur who' s invested money, but not long hours of labor into a company might argue that he or she has a business rather than a job.
In fact, there are a number of enterprises in which the investors have a financial interest but little or no involvement in operations.
And indeed, that enterprise might well be a business for purposes of this discussion.
But there's a question concerning return on the buyer's investment.
If there are little or no owner's discretionary earnings at the end of the year, the enterprise, though technically a "business," is not a very good business.
The way for the owner to generate some cash flow is to show up for work every day, replacing employees and taking, as an income, the money saved by reducing staff.
Now we're back to the fact that the person has bought a job because the owner's intense involvement is required if the business is to generate a return.
3.
Change in value: A critical factor to be considered is whether the buyer is able to realize an increased value for the business opportunity investment, whether or not involved as a full-time worker.
That means the person laboring in say, a retail or service business, and taking out a salary, might actually not be merely the owner of a "job.
" An increase in the value of the enterprise, by 10 percent or more after a year or two following the purchase, can be considered proof that it's a business, rather than a job.
Frequently, the difference can have more to do with the intent and action of the buyer than character of the business.
An entrepreneur might have purchased a job in which he or she is working every day for an income.
But if the owner is working "on" the business, not just working "in" the business, the result often is an expansion of markets, new products, additional locations or other payoff due to implementation of smart growth strategies.
A growing enterprise is, for purposes of this analysis, a "business" rather than a "job" even if the owner is earning his or her "living" as a full-time worker in the company.
Understanding these principles is useful for a buyer who's considering whether to purchase a business opportunity or a job, and wants to know the difference.
But it's important for entrepreneurs to consider this question when establishing criteria for the search, and when becoming educated in order to make smart buying decisions.
As a guide for determining whether you're buying a job or purchasing something more than that, consider these three principals that shed light on the topic and clarify some of the issues involved: 1.
Level of owner's involvement: The seller may claim the offering is a terrific business opportunity with wonderful potential, but if his or her full-time participation is necessary to make the company run, it looks a lot like a "job.
" Being tied to the kitchen, or office, or retail counter for much of the day, during business hours, is pretty much the same experience whether you own a business or labor in someone else's company.
It's nice to think: "this is my business, I can do whatever I want.
" But the reality is that the person who has left a job for a business that's just as demanding of daily attention may not have made much career progress--may have bought a job.
2.
Return on investment in absentee business: The entrepreneur who' s invested money, but not long hours of labor into a company might argue that he or she has a business rather than a job.
In fact, there are a number of enterprises in which the investors have a financial interest but little or no involvement in operations.
And indeed, that enterprise might well be a business for purposes of this discussion.
But there's a question concerning return on the buyer's investment.
If there are little or no owner's discretionary earnings at the end of the year, the enterprise, though technically a "business," is not a very good business.
The way for the owner to generate some cash flow is to show up for work every day, replacing employees and taking, as an income, the money saved by reducing staff.
Now we're back to the fact that the person has bought a job because the owner's intense involvement is required if the business is to generate a return.
3.
Change in value: A critical factor to be considered is whether the buyer is able to realize an increased value for the business opportunity investment, whether or not involved as a full-time worker.
That means the person laboring in say, a retail or service business, and taking out a salary, might actually not be merely the owner of a "job.
" An increase in the value of the enterprise, by 10 percent or more after a year or two following the purchase, can be considered proof that it's a business, rather than a job.
Frequently, the difference can have more to do with the intent and action of the buyer than character of the business.
An entrepreneur might have purchased a job in which he or she is working every day for an income.
But if the owner is working "on" the business, not just working "in" the business, the result often is an expansion of markets, new products, additional locations or other payoff due to implementation of smart growth strategies.
A growing enterprise is, for purposes of this analysis, a "business" rather than a "job" even if the owner is earning his or her "living" as a full-time worker in the company.
Understanding these principles is useful for a buyer who's considering whether to purchase a business opportunity or a job, and wants to know the difference.
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