3 Common Myths People Believe About Starting Their Own Business
I have been running auto shops for a long time now, and I spend a good part of my week training people and talking to owners who are just getting started. There a few common misconceptions that come up over and over again. Some of them come from social media, some of them come from watching a business from the outside and guessing at what is happening on the inside. Here are the three I hear most, and what I have actually seen in my own stores.
Myth 1: You will finally get some free time
A friend of mine said to me once that someday he wanted to open his own business so he could have a lot of free time. I did not even reply to his message. I went and found a video of Dana White saying that if you think you are going to start your own business and work less, you are delusional, and I sent him that instead.
That is exactly how it works. You work harder than everybody else and longer than everybody else. You carry more responsibility than everybody else. The reward is bigger on the other end of it, and you get to spend your days on something you actually love, which is worth a great deal. The tradeoff is real, though, and nobody should walk into it expecting a lighter schedule.
Social media has done real damage here. People see the fancy cars and the vacations and the laptop on the beach, and they assume that is what ownership looks like. What they are seeing is the highlight reel from a very small number of days.
Myth 2: You can build a real company from your living room
When COVID first started, a friend of mine told me that his son's company, Staples, was doing great with everybody working from home, and that it had created a competitive environment. I told him right, and that I could not believe it and I was not buying it.
I train people every single day. I have them standing right in front of me. I tell them exactly what the expectation is, I show them how to do it, and plenty of times they still do not do it. So the idea that I could tell someone what to do, send them home to work in a basement, and have it get done was something I just didn’t (and still don’t) see as realistic.
Five years later, most of the companies I watch are bringing people back into the building in some form. That does not mean every person underperforms at home, and hybrid arrangements work fine for a lot of businesses. What I have seen is that you can build a company remotely and you will have a much harder time building a culture that way.
The energy is a real business asset that people underestimate:
When 20 people are in a building, there is action. People are coming in and out, asking questions, moving fast, and that pace is contagious.
When something goes wrong, you have somebody standing right there to back you up.
When something goes right, you get to celebrate it with 20 people instead of celebrating it alone at your kitchen table.
I tell people that if they want to learn a business, they should go stand inside one. Following an owner around all day and watching what actually happens will teach more in a week than a year of reading about it.
Myth 3: Revenue means you are making money
There is a line I love. Revenue is for vanity, profit is for sanity. A guy I know named Todd puts it another way, which is that gross without net is gross.
Almost everybody in my industry starts the same way. They are a mechanic or a service advisor, and the only number they ever see is revenue. The math in their head goes like this. The shop charges $200 an hour and pays me $50. So I will open my own shop, charge $140 an hour, make far more than I make now, and pull in more customers because I am cheaper than my old boss.
I know exactly how that thinking goes because I was that guy.
What happens next is that they open the shop, they charge $140 an hour, and within a year they are just rotating money through the business with nothing left at the end. The costs they never saw from the technician's side are the ones that eat the whole thing:
Equipment upkeep. Last week a company came out to inspect our lifts and the inspection alone was $1,500. Today they are back in the parking lot replacing worn cables and parts they found, and that is another bill on top of it.
The real cost of an employee. If you pay somebody $1,000, that employee costs the business closer to $1,200 or $1,300 once you account for payroll taxes, health insurance, and uniforms. Assume at least 20 percent above the paycheck.
The operating layer. Lease payments, the software required to run the business, the payroll company, the bookkeeping, advertising, and the coffee and water you put out for customers. All of it costs money every month.
Then there are the mistakes. If a car gets damaged in our shop or a job has to be done a second time, I am buying the parts again and paying a technician again. Say that costs $1,000. To net that $1,000 back, I need to sell something in the range of $5,000 to $6,000 in additional repairs. That technician is also tied up redoing old work instead of starting new work, so the loss compounds.
A guy told me once that he was going to start flipping cars and make a few hundred dollars on each one. I asked him to run the numbers with me. He sells five cars in a month at $600 of profit each, which is $3,000. Then one of those cars comes back with a bad air conditioning compressor. Every dollar he made that month is gone, and he worked four weeks for nothing.
There are months in the life of a business where you work harder than anyone on your payroll, you carry all of the responsibility, and you write a check at the end instead of collecting one. That is a real part of ownership and it happens to good operators.
What to take from all three
Product knowledge and business knowledge are two different things. Being the best mechanic in the building tells you nothing about whether the building makes money. Before you open the doors, learn your numbers and learn how the operation actually runs, because the revenue figure on the wall is the least useful number you have.