The basics of running a business haven’t changed since trade began. Sure, we have the internet and social media, and digital technology is advancing faster than many of us can keep up with, but when it comes down to it, the most important part of a business boils down to a few simple calculations on a single page. I’m talking about a profit and loss projection that shows you immediately what you have to do to turn a profit.
Tell me about any business opportunity, and I can grab a piece of paper and outline a plan detailing how it might become profitable—on a single page. My initial business plan for Paychex was exactly that: one page. I calculated what my operating costs were and discovered how many clients I needed to sell to break even. In many ways it’s that simple. If I’m a retailer selling popcorn, how many people do I need to come through the door and buy my popcorn to allow me to pay all my bills and give myself an income? The rest is strategy, useful but peripheral.
Recently I was sitting in my car outside a video game store. It wasn’t in a good location, and I watched how few people were going into the store and even fewer coming out with a purchase. The arithmetic wasn’t complicated: the average price of a game is not very high, and the sheer numbers required to pay for overhead (rent, utilities, inventory, etc.), let alone an income for the owner, meant there would have to be a continuous stream of people entering the store for the business to be profitable. Let’s look at the basic math:
Annual Overhead on a Small Store
|
Rent |
$15,000 |
|
Utilities |
$3,600 |
|
Employee |
$20,000 |
|
Freight |
$1,000 |
|
Professional fees |
$5,000 |
|
Owner’s salary |
$60,000 |
|
Misc. |
$6,000 |
|
Total |
$110,600 |
If we take the average price of a sale as $60 with a gross margin of 40 percent, this results in a gross profit of $24 per sale.
This is where it gets interesting. If we divide the store’s overhead (bear in mind we are using the barest minimum of expenses) by the gross profit made on each sale, we can see that the store needs to make 4,608 sales per year. If the store were open 6 days a week for 52 weeks per year, which is 312 days a year, they would need almost 15 sales a day, every day. Of course, sales at Christmas would be more vigorous and the sale of used games delivers a higher profit margin, but the need to have a consistent flow of customers purchasing something every day makes it very doubtful the business could be successful at this location.
I have used this quick-and-easy, one-page calculation countless times to quickly ascertain the viability of a business concept, and after I have done a full financial workup on the business, it is usually proven correct.
I’m not a fan of business plans that could double as doorstops. Who’s going to read a thirty-thousand-word plan? Actually, I’m not a fan of the business plan document itself, although I do believe entrepreneurs have to thoroughly understand everything to do with their business. My advice is to focus on the key points and financials that demonstrate your business concept is viable and cut the rest of the verbiage. The peripheral stats, five- and ten-year projections, and other useless elements of many business plans can be ditched; they’re not fooling anyone. These “by the pound” business plans are often used in an attempt to justify the author’s claims. They are crammed with documents containing masses of statistical information and projections, or as I like to call it, “fluff.” Business plans should keep to the basics.
The second piece of advice I’m going to give you is to keep it real. Nothing turns off a lender or an investor more than exaggerated or poorly thought-out statements, promises, and projections.
People come to me all the time with what they consider a great idea with nothing to back up their claim. These people start and close businesses every day. There is no sense of reality to what they are trying to achieve. In retail, for instance, location and the type of product they are trying to sell can make it impossible to make enough money to survive—but people keep trying.
To me, it’s a simple calculation, as you saw with my simple analysis above, but very few people do the math. They let passion cloud their judgment. That’s the myth many business books peddle: “Follow your passion,” or “Believe it and you’ll achieve it.” That sort of thinking can lead you down a dangerous path.
The most important thing when planning your business should be the accuracy of your facts and statistics. You need to be able to provide proof of the veracity of your figures. If I see a plan that states a business is going to capture 10 percent of the market, I’m suspicious; warning bells are ringing. Today, in spite of decades of history in the market, if you combine ADP, Paychex, and Intuit (the third-largest player in payroll processing) together, they still only have less than 20 percent of the potential payroll processing market. Wildly inflated projections are common. Sometimes they can simply be the result of overenthusiasm on the part of the entrepreneur, but they can also be used to mislead the reader. Understanding your market, or the market someone is trying to get you to invest in, is of paramount importance. The same is true when buying a business, but I’ll talk more about that later.
A few years ago, someone came to me with a new HR product for employers. He was hoping to sell it to Paychex’s customers with one thousand employees or more, which he excitedly stated was 10 percent of our company’s clients. He estimated that number to be fifty thousand clients, then he multiplied that figure by one thousand to come up with the market for his product of fifty million employees. That’s all good; in fact, it sounds great, doesn’t it?
Guess what? Paychex delivered only twelve million W-2s the previous year. The market could never be fifty million people. It’s easy to get the math wrong, especially if you haven’t done enough research and don’t have knowledge and understanding of the market and industry in which you are operating.
All too often entrepreneurs get carried away with their sales forecasts and try to make the statistics tell the story they want to hear themselves and to promote to others. In the case above, the reality is the average Paychex customer doesn’t have one thousand employees; it has sixteen—and that’s a massive difference. Projections mean nothing if the person creating them doesn’t fully understand the market.
The myth of business plans is that they are used in an attempt to sell the reader on the strength of a business concept, either to encourage investment or convince a lender to commit funds. In many cases, the numbers are inflated and unrealistic at best and duplicitous at worst. Don’t forget, at some point someone is going to compare your projections to your results. I repeat, projections don’t mean anything if you haven’t done your homework.
Another important thing not only to understand but to accept with every fiber of your being is that a first-rate business plan can often tell you not to start the business at all but run away and run fast. It’s critical that you take a hard look at the actual numbers and be candid with yourself about what they are telling you.
As I said earlier, I’m not a proponent of the business plan document, but I do believe that every entrepreneur should plan their business. And during the planning stages they need to be brutally honest with themselves and with those from whom they are asking financial assistance.
Whether you decide to formalize your research into an actual document or not is up to you, but what follows is an overview of the key questions you need to answer and the information you need to gather.
A good start might be to create a mission statement. Paychex’s first mission statement was “Sell clients, service clients, and make money.” Sometimes it’s as simple as that.
Before I take you through what I consider to be the must-have knowledge when planning your business, I’ll tell you the three most important things investors and lenders need to see before deciding whether they are interested in supporting your business.
This is a one- or two-page summary of your business concept, the industry, your market, and the highlights of how your business will operate. This is a quick overview, so investors can put into perspective what you are about to tell them.
Sometimes referred to as an income statement, this is the one-page assessment I mentioned earlier. Educated readers will immediately be able to tell from this document and the executive summary whether you have a grasp of the fundamentals of your business. At this point they will either carry on reading or throw your pitch in the trash. Trust me, I trash more than I read.
If you still have their attention at this point, you have an opportunity to show them that both you and your management team have enough industry, market, and product knowledge to know what the heck you are doing. In chapter 7, “Lead, Follow, or Get Out of the Way,” I’ll discuss this point in more detail; for now, trust me, you cannot fake this.
The rest of your business planning is important, but without the sections outlined above, it doesn’t mean a whole lot, as you may never get people to listen to the rest of what you have to say. What follows is not a tutorial on writing a business plan; it is a guide to what someone like me who invests millions of dollars annually in start-ups and early-stage businesses expects a business owner to know about their business. I don’t care if it’s written down; it’s stuff you need to know so you have all the answers when an investor or lender comes to you with questions.
I’ll be talking about these areas in the chapters that follow, but first, take a look at the type of information you need to gather and know before you start your business venture.
What are you selling and why? Why have you decided this product or service will add to what is already being offered by other companies? Why should people or businesses buy what you are selling?
I remember identifying the need for the Bidders Guide during my time selling business machines at the Burroughs Corporation. I was on a sales call at the administrative offices of a village in upstate New York, and the town clerk was interested in buying an accounting machine to do water billing. I’d made several presentations and followed all their processes. The town clerk liked the machine and seemed to like me, so things were looking good. Back at the office I told my branch manager I was close to a sale and he asked me, “Where are they going to put their bid advertisement?”
At first I was confused, but I quickly learned that in most states, when a purchase exceeded a certain dollar amount, school districts and municipalities were required to advertise openly for bids. In part, this was to send a message to the public that their tax dollars were being spent wisely.
My manager at Burroughs said, “Get them to advertise in the local newspaper where no one will see it.” It took me a minute, but then I realized this strategy was intended to lessen the odds of our competition seeing the bid advertisement. My immediate thought was, How many times do our competitors do the same thing to us? My second thought was, How much would businesses be prepared to pay to access all procurement notices in one place at one time, rather than buying every newspaper in the state or risk missing valuable opportunities?
Identifying and being able to demonstrate a strong need for what you sell is integral to a good business plan.
A business’s financials are more telling, prophetic if you like, than any other facts, statements, or information you provide, so you need to take them seriously. In a formal business plan, they’re usually pushed to the back. That makes no sense to me; they should be up front and given the respect they deserve.
If you can’t read and understand financial statements, one of your first jobs is to educate yourself. I’ll give you a primer in the next chapter to get you started. If you are already familiar with and can read these documents, good for you. Now start improving your overall understanding of financial statements.
In what industry will, or does, your business operate? How does your business fit within that industry? Don’t fall into the trap of trying to tell the history of the industry or include peripheral facts and statistics. Keep your comments specific to your particular position in the industry today, the sector you fall into, and the size of the market sector in which you will operate.
Who are they? Where are they? Where do they currently buy similar products or services to yours? What is their socioeconomic status? Why will they buy what you sell? What is the size of the market and how much of it are you likely to capture? Show you understand the financial limitations of your typical customers and how you will target them more effectively.
Too many entrepreneurs try to guess the characteristics of their market instead of doing the prerequisite market research. These days market research is easy; you have the internet. When I launched Bidders Guide all I had was the local library. Before deciding to launch the publication, I spent many hours learning everything I could about government procurement along with the companies that answered bid notices—the companies that would become my customers.
Do not try to guess the characteristics of your market; go out and discover them. Along the way you will find surprises, identify new markets, and uncover additional products and services that your market requires.
Market research is the cornerstone of business planning. Everything hinges on the information you gather. Market research gives your plan credibility. It also will give you peace of mind. Without market research your business planning is fiction or, worse, fantasy!
I’ll talk more about this later, but know one thing: every business has competition, either direct or indirect; your job is to carve out a piece of the pie for your company. Your plan should provide a realistic assessment of your competition and your strategy for getting a share of the market.
Too often entrepreneurs overestimate what customers are willing to pay for what they sell. The research you do on your competition will help you come up with a price that people are used to paying and that will also provide your company with the profit it requires to be successful.
Every business requires a unique promotional strategy. The market research you carry out, especially on your prospective customers, will help you identify where you need to advertise. In today’s social media–crazy world, the options are almost endless, but when developing your marketing strategy and budget, keep it real.
A business plan needs to show the reader how the business will sell its products and services. Your marketing strategy will demonstrate how you will get what you sell noticed, but you also need to prove you have a strategy to bring in orders. Outline in your sales process how you will identify prospects, qualify them, contact them, and then sell to them.
Sitting by the telephone waiting for it to ring is not a sales strategy.
If you are going to manufacture something, you will need to demonstrate the process you go through to end up with the finished product. Include information on the equipment required, the cost, the production facility, output capacity, inventory requirements, and access to raw materials and suppliers.
How are you going to get your product to your customer? Will you deliver it yourself? Employ a delivery person? Get sales staff to deliver it when taking orders? Mail it? Courier it? And, of course, what will it cost?
What legal business structure are you proposing? Proprietorship, a partnership, a corporation? Before deciding which legal structure is best, get advice from your accountant and lawyer. Before that, however, read the section below to get an overview of your options.
Although the process of legally forming a company has become easier over the years, especially with online legal services and standardized documents, the decision as to which legal structure you should choose is still complex, a decision made more complicated because of annual changes to tax regulations.
At some point, however, you are going to have to decide how to legally structure your business. Much will depend on how you plan to operate now and how you see things developing in the future. I suggest you build in as much flexibility as you can from the outset, as things have a habit of changing rapidly. The two most important things to consider initially are liability and taxation.
You may think that flexibility is not an issue, that you know how your business is going to grow and what it will look like in several years’ time, but things change. When I first started Paychex, I was focused solely on the Rochester area and had no plans to service a larger territory, let alone the whole of the country, but I ended up bringing partners on board and selling franchises. Later we consolidated into one large corporation and eventually went public.
The legal structure of the business had to change many times over the years, and every time it did, the legal and accounting fees were not insignificant. Had I thought about, or even considered, potential growth, I would not have started as a sole proprietorship but would have incorporated from the outset.
What follows is a quick overview of your options. My aim is to give you enough information so that when you meet with your accountant, tax advisor, and lawyer you at least know what they are talking about. Your specific set of circumstances, however, will determine the correct legal structure for your business. First, a word on taxes.
There is a significant difference in the way different structures are taxed. Sole proprietorships and single member limited liability companies (LLCs) are taxed directly to the individual owner on their personal tax return. Multiple member LLCs and S corporations typically file their own separate tax return and issue K-1s to each member/owner, so the net income or loss is typically reflected directly on that individual’s personal tax return (though they both have the option to be taxed like a C corporation).
C corporations differ because they must file returns and are taxed independently of the owners of the corporation. Therefore, when profits are distributed to the owners through dividends, those dividends are then taxed on the individuals’ tax returns. This is referred to as double taxation of C corporation profits and is the reason many small business owners do not establish a C corporation when starting their business.
It should be noted, however, that recent tax law changes have tried to reduce the discrepancy between the various corporate structures.
This structure is the least expensive to start or form. One downside is that legal liability is borne directly by the owner. There is no corporate entity to shield liability.
LLCs can elect to file as either a corporation or a partnership. One advantage is that there is less legal paperwork to establish them when compared to S and C corporations. The legal structure provides the owner some personal legal protection from a lawsuit against the business. LLCs (as compared to C corporations) can be beneficial for active business owners who expect business losses in the early years of the company. The reason being that losses would pass through to the individual’s tax return, which could be a benefit if there is other ordinary income to offset. LLC income is subject to self-employment tax.
S corporations can elect to file as either a corporation or a partnership. They can have no more than one hundred shareholders and only one class of stock; other corporations or partnerships are not permitted to own interests, and the IRS scrutinizes distributions to owners as they can be characterized as dividends or salary.
C corporations have no restrictions on the number of shareholders or what type of entity can be a shareholder. However, if the company’s total assets exceed $10 million and there are over two thousand investors in total, or five hundred nonaccredited investors (based on the 2016 passage of the Jumpstart Our Business Startups Act [JOBS Act]), the company needs to follow public filing and disclosure rules governed by the Securities and Exchange Commission (SEC). If the owner believes early losses are expected, then those losses would be held up on the tax returns of the corporation and would not flow through to the owner’s personal tax return.
Certain tax credits offered by the IRS may only be available to C corporations in a given industry and can’t be passed through to an individual through an LLC or an S corporation. This may be important when making your decision as to what legal structure you adopt.
As I said earlier, the biggest thing is to have an idea of the legal structures open to you and think through how you imagine your business developing over its first few years. For instance, will you be the only owner forever? Do you want to bring in a partner from the beginning, or possibly look for a partner to buy into the business in the future? Will employees be granted ownership as part of their compensation for services? If you have more than one owner, consideration needs to be given to what happens if a member or owner wants to sell or leave. The situation might be handled very differently in an LLC as compared to a C corporation. The operating agreement of the LLC and the buy/sell agreement (if there is more than one member) are critical documents in order to plan for how both expected and unexpected situations will be legally handled in the future.
I have used many of these various entities to grow my businesses. I might form a C corporation because of the use of different shares of stock (preferred stock to the main owner, restricted common stock to key people/executives, then possibly stock options for common stock to other employees). I’ve used LLCs predominately to take advantage of the early year (active) business losses in order to offset other income.
Now you know the basics, but you might want to do a little more research into legal business structures. My advice is to always go to an expert before making a decision. Talk to your accountant, tax advisor, and lawyer before deciding on your business’s legal structure.
If you’ve decided you’re interested in buying a business, there are business brokers across the country who will show you businesses that are for sale. Remember, a business broker is just like a real estate broker or a car salesperson. They’re going to emphasize the positives and not necessarily highlight the negatives. But they could be a good source to help you discover what’s available.
Whether you should buy a business or start your own is your decision, but let’s discuss what’s involved in buying a business. A lot will depend on your financial situation, the industry and market you are looking at entering, the competition, and what opportunities are available. Understanding how to evaluate each opportunity from a risk perspective as well as an investment opportunity is important. The biggest mistake entrepreneurs make when buying a business is not doing enough due diligence.
The biggest benefit of buying an existing company is current revenue and, behind that revenue, a customer base that has hopefully existed over a period of time. This provides a level of predictability—and that’s good, very good. Second, you will be able to assess what the company’s operating expenses are and see what profit is being earned. Obviously, buying a company that is profitable offers a significant benefit. It’s also far more likely you will get the support of banks and other lending institutions for an existing business that is showing a profit than for a far riskier (in their eyes, anyway) start-up.
There is also the possibility the seller might take part in the financing. In other words, if you come up with, say, 25 percent of the purchase price, the seller might take back a promissory note for the balance. It’s always worth considering, and obviously it’s a matter of negotiation.
Another benefit is the management structure. Having a knowledgeable and experienced management team in place that knows the company’s customers, the industry, and the business itself is invaluable. That is, of course, if they are doing a good job and plan to remain under the new ownership.
Inheriting established employees who are important, or at least somewhat important, to the operation can be a considerable advantage. They’re already trained. Based on their tenure, you can probably tell whether the previous owner was happy with them and whether they are quality employees. One of the most important things you should do before making a final decision is to identify which key employees are willing to stay under new ownership. You may want to consider offering an extra incentive package to encourage these people to remain. Remember, losing key players can be detrimental to profitability. Imagine, for instance, what losing the company’s top two or three salespeople would do to revenues.
If you purchase a family business, where family members hold a number of critical positions, you may lose your management team once the business transitions to your ownership. Negotiate in advance a transition period during which you can hire replacements who can hopefully be trained by the family.
The benefits of having an existing customer base shouldn’t be underestimated. Your market knows your product or service, it is established, and credibility and trust have been earned. You may have to create new products or reinvent others to stimulate sales, but you are not starting at zero when it comes to your customer list and you will also be able to identify your top customers and their buying (and payment) track records.
When looking to purchase a business, always question why the person is selling. Make no mistake—there is always a reason. It may be obvious. Perhaps they are retiring and have no family to take over the business, or perhaps no one in the family is interested. Many of the more nefarious reasons can often be discovered by a thorough examination of the financial statements.
This is where the quality of the seller’s accounting records comes into play. For example, annual sales revenue should be rising or at least staying level. If it’s going down, that’s a red flag. Same thing with profitability. Another thing people selling businesses like to do, specifically in cash businesses, is inflate the company’s revenue by telling would-be purchasers that there is a certain level of cash revenue—revenue that may not be totally reported, or in a worst-case scenario, that may be totally exaggerated. You have to make a value judgment as to the level of that cash business and whether you feel okay doing business that way.
A word of warning: there are some very devious people out there who would love for you to take their ailing business off their hands. Recently one young entrepreneur I’m working with came to me with what he thought was a wonderful opportunity to buy a business. It took only seconds for me to recognize a major concern: the accounts receivable figure was almost 90 percent of total revenues. That percentage is unrealistic, so with minimal digging we discovered that most of the accounts receivable were for inventory that was out on consignment and not actually sold. The question became how much of that product would be sold and how much returned. The lesson? The company was predicting income that may never exist.
Another factor to look at is that owners who have businesses up for sale may have a tendency to inflate the value of their fringe benefits. In other words, they will tell you they get a company car or health benefits. This may well be true, but those benefits are all part of the company’s existing profitability. Sellers often overexaggerate how much these benefits are worth.
There’s one thing that prospective buyers often overlook, and that’s an upcoming technology tsunami. Many companies are falling victim to changes in technology that will alter the way they operate or make what they sell obsolete. There are many examples of companies that were thriving but got swept away by new technology they were not prepared for or could not afford to embrace—for instance, those in video rental, music CDs, the yellow pages, pay-phone franchises, film processing, computer printout paper, and currently, newspapers.
When looking at purchasing a business, consider what is happening to the industry from a technological standpoint. The last thing you want to do is take over a business only to discover you need all new equipment and technology within a year or two.
It’s very easy to get caught up in the trappings and glamour of being an entrepreneur, the excitement (and it is exciting) and the exhilaration. Because of it, you may not do a thorough job of looking at the facts. That’s where big risk enters the picture.
When I consider buying or investing in a business, I have what I call my red-flag checklist. I thoroughly examine the financial statements. The balance sheet, the profit and loss statement, and the cash flow statement all help me decide what I should focus on and the questions I should ask the owner.
My biggest piece of advice is to go through the profit and loss statement line by line and identify exactly what is included under each expense line item. This is the only way you can understand the business intimately.
Another area of concern when buying a business that includes inventory is its value. The value of existing stock obviously has a major impact on the selling price. If the value is inflated, or a percentage of the stock is outdated and unsellable, you could be in a very dangerous situation.
Not everything in a company’s warehouse sells well; some items may be bestsellers, some sell slowly, and others may have been sitting in the warehouse gathering dust for years. Whether it is the former or the latter, you will be paying the same price. As a buyer, you need to know what percentage of the inventory is turning over regularly; that is, what is making a profit and what will end up costing your company money? If 20 percent is unsellable, that’s a huge loss you will have to write off. And that’s going to affect your profitability right from the outset.
If you are committed to buying a business, you will want to get the best possible deal. But what is a good deal? Is it a good enough deal money-wise to justify the purchase price?
A return on your equity investment is a major criterion. Quite frankly, I would never invest in or buy somebody’s business that didn’t give me a good return on my investment. Let me explain that further. If you’re trying to establish the value of a business and the business returns a profit every year of, say, $100,000 after owner’s compensation, what should you expect to pay for that business? Now, if $100,000 is the profit, and the sale price is $1 million, that’s a 10 percent return on your money; if the purchase price were $3 million, that would only be 3 percent.
Personally, I don’t think that’s enough. I look for 15 to 20 percent as a minimum. Now, if you only paid $500,000, your return would be 20 percent. That return is important, because unless you had cash in hand to make the purchase, you would have to pay off a loan, with interest.
For example, if you paid $2 million for the business and you only made $100,000 profit, which is 5 percent, you might not have enough margin to make your principle and interest payments on the money you borrowed to buy the business.
To put it another way, how long do you want to work before you get your initial investment back? If you’re paying $1 million and you’re only getting $100,000 of income, you’ve got to work for ten years until you get your investment back. With this simple thinking, you can start to evaluate the price compared to the profitability of the business.
This method will help you value a business, but there is another factor that could come into play, and that is if you are privilege to some unique knowledge, something you know you can do to make the company grow faster than its current owner or management team has managed to achieve. In this case you might be willing to pay a premium for the company because you know you can exceed that 15 or 20 percent return.
For example, you may be able to create significant economies of scale or there may be some part of the company you can split off into a new division or sell separately. At Paychex, we bought companies on occasion for their software rather than for their business.
Another way you can make a purchase a better deal for you is to spot when a company’s expenses are bloated. When you think about value, instead of just seeing the growth of revenue, you might also recognize that there are expenses that could be peeled away to immediately enhance the company’s bottom line. Some owners have little control over their expenses, and a new owner with a sharp pencil can increase bottom-line profit quite easily and effectively.
Franchises are another area of business opportunity with their own advantages and disadvantages. Buying a franchise could be right for you, but there are a great number of factors you should take into consideration.
On the positive side, you generally have a product that has a good track record, and it can be measured against the success of other franchisees. The franchisor provides a proven pattern for operation or management, and they are there to assist you in finding the right location and provide training for both you and your employees.
On the negative side, they may limit your ability to make product changes or enhancements; to franchisors there is value in consistency. Unfortunately, this may restrict your options when it comes to product definition. In addition, you will almost certainly have to pay them a continuing royalty, a cost that has to be built into your business expenses.
Before deciding to purchase a franchise, be very confident in the brand you’re choosing; after all, you are putting all your eggs into that particular basket. Consumers have a lot of choice, and that creates risk, especially if you’re not choosing a well-established name.
The first thing you should do if you’re contemplating purchasing a franchise is to talk to other franchisees and ask about any concerns they might have about their franchisor. Do your due diligence. Ask what issues they have faced and how they were dealt with by the franchisor. Generally speaking, franchisees will more than likely be happy to talk to you and will give you honest feedback and firsthand knowledge.
There are certain businesses that offer little or no return on investment but do provide the owner with a regular income. These are often one-person businesses, such as a small retail store or perhaps a consultancy. Buying a business like this offers the owner a great deal of independence without the responsibility of managing employees.
For instance, let’s say you want to realize an annual income of $100,000. You can certainly purchase a business that will generate that salary for you. The challenge is, there may not be enough profit left over to give you a return on your investment. Basically, you have bought yourself a job. It may not be a good investment, but people do it all the time. The reason, of course, is the freedom of working for oneself, not having to report to anyone, and not having a boss. Psychologically this can be very important to some people, and they might eventually be able to sell the business to someone else and get their investment back, but there is, as with all business ventures, a level of risk involved. However, as I said in the opening chapter, there is also risk in having a job.