Ways to Look at a Business

Let’s talk about how you can see your own business and thus the different business goals you might have, and the way that seeing that business imposes different structures and processes.  Now, since most of us are single-owner businesses, when I talk business goals, there’s a lot of cross-over between what the owner wants and the business wants.  As an example – if the owner’s goal is to work 10 hours a week, the business goal becomes to ensure that the owner can work 10 hours a week.

How you structure your business is dependent on the goals you intend to achieve.

Seems self-evident doesn’t it?  Let’s give a few examples:

The Business as a Job – the most common goal, the business is just another job.  You go in, you get paid and if you’re lucky you get to tack on a bit of extra profit.  In this case, hiring is minimal – you have a few part-time employees to help out during busy periods, but for the most part, you are the main employee.  This is probably the most personally profitable method (in the short-term) as you earn both a salary and any profits.  Often, this kind of viewpoint imposes a limit on the growth of the company though – as the owner works in the business rather than on it.

The Business as a Passion – I could also call it, the business as a hobby.  You see this structure more with publishers than you do with retailers, but it’s still possible as a retailer.  Here, the business isn’t run as a business but as an outlet for a passion / hobby – whether it’s publishing games that you designed yourself or a store that is a ‘club’ for regulars, the goal isn’t to make funds so much as achieve the passion.  In cases like this, the focus is less on the bottom-line and more on achieving the business goal, which can be detrimental to the business itself.  A great passion project example would be the Steve Jackson Ogre release.

The Business as a Corporation – This is much more common when you start viewing the business as a separate entity from yourself.  This might be imposed on you (if you have additional shareholders) or as a self-imposed viewpoint, but it forces a more ‘corporate’ viewpoint on goals and structure.  For example, that ‘Manager’ better get paid a regular salary, even if that Manager is yourself.  Neither can you impose random expenses on the business as you have to justify each expense (beyond the Taxman), which can impose a harsher standard.  It is also good training in many ways but less profitable for the company – if you are paying your Manager market-level salaries, your profit is likely to be overall lower but it does allow you to eventually hire someone in for that role.

The Business as an Investment – This is a strange viewpoint but it looks at what you have invested in the company (both real capital and opportunity cost) with an eye at generating a return and the risk of loss.  It reviews the business with an dispassionate eye,  looking for points of failure and final value in the event of a bankruptcy.  Depending on if you see the business as a long-term or a short-term investment, it could dictate how much additional funds you’d be willing to invest in the company.  For example – most game companies are bad investments.  Single point of failure (one industry), quite often with a key employee (you) and almost no assets at bankruptcy (low liquidation value for game stock).   In a case like this, you might view the company as needing to generate profits now so that you can cash out your loans / shares as much as possible.  This imposes cost-cutting procedures through the company and probably hiring freezes.  It’s not a bad viewpoint to occasionally use those; as it forces you to look extremely critically at what you’ve done.