When I meet with aspiring entrepreneurs, I always ask them what type of business do they want – Asset or Baby?
Inexperienced entrepreneurs try to have it both ways. But it doesn’t work that way. Your business needs to be either an Asset or a Baby.
Asset Business
Asset businesses are all about building shareholder value (making money). Public companies and private companies with outside (unrelated) investors are great examples of Asset businesses. The simple reason these are Asset businesses is that their shareholders expect a return on their investment.
Asset businesses are typically bigger, more financially successful than Baby businesses. The problem with Asset businesses can be best summed up by the old saying, “It’s not personal, it’s just business.”
Baby Business
Baby businesses are all about retaining ownership, control, or keeping it in the family. Lifestyle companies are Baby businesses. Many entrepreneurs start a Baby business as a way to create a job for themselves. New entrepreneurs usually start a Baby business without realizing it. That’s where the thinking “My company is not for sale” comes into play.
The one advantage of Baby businesses is employees enjoy working for them. Baby businesses are like family. Often, several employees are family members (which brings up a whole different topic I’ll cover at a later time).
The big disadvantage of a Baby business is there is too much emotional and personal attachment. The desire to retain control can cripple or even kill a company. I know this from experience. My first software company was a Baby business. Upon reflection, it should have been an Asset business.
What Should You Do?
The question is simple – Baby or Asset?
Step 1 – Decide.
Choose what type of business you want. Communicate that decision with everyone involved – cofounders, employees, management, board of directors, and your investors. This will help to focus and drive everyone to work together, toward the same goals and objectives.
Step 2 – Be consistent.
Make sure everyone in the company (especially you) say and do the same thing. Don’t confuse people by saying your business is an Asset and then do Baby type actions. That will only hurt your company in the long run.
So – What type of business do you want?
Shaun McNerney
Shaun – This is exactly the clarity I have been looking for to define the discontent I feel in my current position. These folks can’t decide which one they are. It makes it very uncomfortable for the employee to have it presented as one type only to find out it is the other.
Shaun,
The Baby business sounds appealing in many ways and that is what I am creating with Fusion Marketing Partners. However, as you suggest, it is sometimes important to have a bit of detachment and not take everything so personally. This way, you can have a lifestyle business that turns into a real asset – financial and otherwise.
Chris
Shaun,
I remember having a related discussion with you about Tellsoft in a Chinese restaurant. At the time you were planning on self funding Tellsoft.
Your point about baby versus an asset business is well taken.