Are you operating a Hobby or a Business? You decide…

I often ask business owners:  Are you operating a hobby or a business?  First, they look at me like I’m an idiot (I’m not offended, because I expect it) and then they reply:  A business, of course. 

The question first comes about when business owners complain about not making enough money, going backwards, or being “stuck” and I ask to see their financials. And they hand me a hand-written sheet of paper or an Excel spreadsheet that they’ve manually input with their sales and expenses. 

Or, I ask about what their plans are for 2015 and they say something about growing by 20% - but there is no plan on HOW they will grow (strategy) or WHAT they need to do (tasks) or how they will measure (assess) to ensure they get to their numbers or understand what adjustments they need to make. 

So, the truth is, they will continue to do what they’ve always done and continue to question why nothing is changing (or worse, going backwards).

Before we get into semantics, the Merriam-Webster dictionary defines a Business as “the practice of making one’s living by engaging in commerce”.  So, by that definition you may own a business, but the question is are you operating it as a Hobby or a Business.

What I go on to explain is that you can also make money at a hobby, so sometimes it is difficult to discern.  How I generally explain the difference is that a company operating as a BUSINESS:

  1. Operates and makes decisions from an actual set of accounting books and financial statements produced by an accounting software program, no matter how simple
  2. Has documented policies and procedures that ensure the business will operate in the absence of its owner
  3. Operates from a clearly defined plan or focus for where the company is headed  and objectives or goals that are measurable to ensure it gets there

A company operating as a HOBBY may have 1 of the above, but most have none!

This is not about judgment, because if you are happy with your company’s progress, it truly doesn’t matter how you define it.  Operating as a hobby doesn’t mean that the company won’t make money or that it won’t have returns or that it won’t provide to you exactly what it is you need or want.  What it does mean is that it will not grow or evolve from successful to sustainable, if it is not operated as a Business operates.  It may not even get to successful!

This is all about alignment:  aligning expectations with behaviors. If you treat your company as a hobby then you cannot expect to grow your company like a business – that is a truth – not a judgment.

Here’s the good news: If you are happy with where your business is going, then congratulations are in order! Continue to do what you are doing and enjoy the journey.

If you are not happy with where you are landing in 2014 and want to move forward, in a big way in 2015, then read on…

First things first…DECIDE that you are willing to do whatever it takes to operate a successful business.

Then…START from where you are!

Here is a simplistic view of where to start - simple is always better:

FINANCIAL:  Start with you financials.  Ensure they are accurate, relevant, and easily updated.  Review them consistently and make decisions based on their story. As I always say: You have to know your numbers to grow your numbers!

ASSESS:  How did you get where you are today? Define what is working and what is not working.  Keep the “What’s working” and either fix or remove the “What’s not working”

PLAN: Decide where you are going and develop the plan to get you there.  Make sure it is reasonable and attainable

EXECUTE (the plan):  And then you must execute the plan (hint: without this step, not much will change). Do that which you know you must do! To quote Nike: “Just do it”

MEASURE: “What’s measured improves” Peter Drucker.  Measure the results of your execution.  If something is not working you will find out early and be able to make meaningful adjustments or changes

Don’t judge it.  Don’t look backwards. Don’t attempt to do it all tomorrow.  Instead, make a plan to get started.  Take baby steps.  Each step forward, towards the goal, is a step in the right direction. 

On your mark…  Get set…   GROW!

About All Systems Grow

We understand the importance of systems and processes in a successful business. Systems and processes provide a foundation for the company to operate and for its employees to properly function and execute the company’s plans effectively. Sounds boring and incredibly tedious we know, however, we also know the most successful companies operate from systems first. As a matter of fact, effective systems provide the framework for growth! Learn More

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