Building a business without either the ability to fix something or create something (preferably both) is truly hard.
An engineering ability, using math’s and science to solve problems and/or a creativity ability, the tendency to generate, possibilities and alternatives to solve problems are key talents that enable a business to attain validity. Afterall, a business exists and sustains by solving problems for customers!
Without these skills, its hard to make a business happen. However, if these skills are not contained and directed as a business grows, the business will simply become a job for its creators and never build into an asset.
Listen to the podcast of Pavlo Phitidis’ discussion about these business mindsets, from The Money Show on 702 & CapeTalk:
What is the difference?
A job is something that operates only with you at its center and meets only 1 of the three criteria of an asset.
An asset has three criteria. Capital/equity value that can grow, income value that can grow and tradability to allow its sale so that the capital value can be realized.
How do these talents/skills need to be directed over time
All businesses go through a development cycle. Usually, this is determined by time. You start, build, grow, accelerate, reach prime, mature and decline. For the average business, in fact for the majority of businesses, they start, build, grow and then move into a repeating cycle of build-grow into perpetuity before they close.
Often, the guilty party enabling this is the exact talent that enabled the startup – the engineer/creative.
Why does this happen?
Psychologically, this talent finds meaning in solving or ideating solutions to problems. There is a thrill and ego bump every time it happens. It can be and often becomes addictive to the point where many business owners are not even aware that this is operating.
Talent in engineering/creative abilities create unlimited timelines. Because you can fix things and do so repeatedly, you can always start again, do it again, recover again after the last effort. This puts you in a position where you can earn income repeatedly because of your talent so you simply just continue.
The talent does not get redirected and channelled differently. In as much as it takes an engineering/creative talent to solve a problem, the exact same talent is required to build a business. Think about what a business is – it is a legal person, that contains systems and operators that serve customers by solving problems for value through a commodity or service. To start you need to have a commodity to trade – a product/service. To grow, you need to wrap it into a business.
From a Job to an Asset
The redirection of these talents needs to come at a point where you can delegate responsibilities to your employees. To get this right, you need a simpler business, that can be driven by systems and enabled by people. Delegation is impossible without a system and a system cannot be built reliably if the business is trying to be all things to all people.
The building industry is a great example as is the advertising industry.
Less is more and simplification is key. Understanding this lets an engineer or a creative redirect their talents away from product or service solutioning to building the commercial wrap to take the product or service to market without them.
This business is no longer a job and now is an asset. A buyer looks and will find capital, income growth and to make it all tradable, independence of you!