a conversation with a business owner

One of the most ambitious dreams I hope to accomplish in my life is to start my own company with friends. In doing so I hope to promote a product or service I'm really passionate about and be able to have a fun and fulfilling experience in the process. What really draws me to starting or owning a business is the excitement involved, and how there is no limit to the success a business can potentially have. Nevertheless, in having a dream, it is important to have a plan as to how I will get there, and it is also important that I have a good idea of where exactly I want to be. Talking to people who have already achieved the things we wish to achieve is a great way to learn more about how we too can achieve our goals, and a very valuable experience overall. I interviewed a business owner about what it was like for him to get to where he is now and his current experiences with being a business owner. He wanted to remain anonymous, so I will not include his name in this post.

I want to be a business owner in the future (picture: LINE store)

Could you tell me about your businesses and what they do?

Sure. The smaller business rents out specialty lighting equipment (searchlights) for events or promotional use. It's pretty much non-operational right now due to COVID-19. But, it's a very special niche in the local market: there's hundreds of event planners/coordinators, and there's dozens of event lighting specialists, but only three equipment rental warehouses and none of those can justify the expense of searchlights. The market can really only support one operation, so I have a virtual monopoly.

The larger business installs and services local municipalities doing street lighting and traffic signals. One side focuses on the routine and emergency maintenance contracts, while the other is focused on new construction and extensive upgrades/repairs.

searchlights are commonly used at big events, but are expensive (picture: 93.1 KISS FM)

When did you realize you wanted to start these businesses, and how did you come up with the ideas for them?

I'm an electrical engineer by training, and after serving in the Army, I worked in the aerospace/defense industry. In late 2014, I found myself with over a decade of strong investment returns but few places to invest at that time to get appreciable risk-adjusted returns. In early 2015, I made the decision to create a holding company that would seek out and acquire small business ventures. The searchlight business was acquired in late 2015 and provides a return of around 20-40% depending upon how much I do the work versus having an employee handle things. At the end of 2018, the construction/maintenance company was acquired; I've been able to increase revenues and profit a fair bit thus far.

I can be fairly clever, and there are a couple patents to my name (for example); but, a small business really doesn't need to be clever and honestly that might be considered a negative. Consider a plumbing business: as a customer, you really don't care if a business utilizes a clever tool or technique, so long as your plumbing issue is resolved quickly, with decent quality, and at a reasonable price. Starting a business, to include developing a customer base, is exceptionally hard. I took the far easier path--I purchased cash-flow positive businesses where the current owners wanted to retire and turn the keys over to someone else who could keep the business going. If you're patient, you can find some really great opportunities this way. I never grew up imagining that I would own/operate two businesses connected to the lighting industry, but the financial data showed them to be good candidates for evaluation and the acquisitions have worked out well.

businesses can be bought (picture: The Business Journals)

What kind of skills and experiences did you have before becoming a business owner that helped you take on the responsibilities and role of a business owner?

My electrical engineering degrees certainly help when working in any field that relates to the use of electricity. Lighting is relatively simple/boring, but that also means it's less risky.

In the Army, I often had soldiers who reported to me, and the Army helped develop and hone my leadership skills. I don't know that anyone is born a natural leader; but, for me, it was something I had to to be taught and practice routinely to be where I am now.

When I worked as an engineer (and then as a manager) for a Fortune 500 company, I got to learn how key financial metrics often drive business decisions. I also got to see lots of terrible leadership, which helped me realize that 1) a bad decision doesn't always break a company or even cause employees to quit and 2) I can do better, if I'm careful, and that should lead to better profits.

Keep in mind, though, that there's no one golden path to success. You'll have to define success for yourself. I believe that having a variety of experiences helps you, but there's plenty of people who do well staying along a single focus for their lives.

leadership is essential in running a business (picture: td.org)

From your experience, what are some of the common leadership mistakes that people make?

Probably the most common mistake is being undercapitalized. Things cost significantly more than the sticker price. Anyone who's bought a house can attest that they needed to spend an extra $10-20k within the first couple months just making fairly standard improvements like window blinds and landscaping and paint. If you are trying to build a company from nothing, you really need to be able to cover your expenses for a couple years. Even with an existing business, you can find yourself in a situation where you do the work and have labor & material costs today, but not receive payment for 90 days. A business needs enough operating capital to bridge the time between when costs are incurred and when payment is received. Accounting doesn't always factor this in; but, it can bankrupt a company quickly if customers stop paying for an unexpected additional 90+ days.

What is the most enjoyable part of being a business owner, and what is the most challenging part of being a business owner for you?

For me, I'm most thankful that I'm able to employ people at relatively good wages (starting pay is ~$22/hr and goes up to around $40/hr for hourly employees). I know a lot of people struggle and live paycheck to paycheck. I like being able to provide living wages, and not feeling like I have to suppress labor rates in order to turn a profit.

That being said, the people are the most challenging aspects. Technical problems nearly always have a technical solution; that means it's ultimately solvable if we just work through the details. You can't always solve personality conflicts. Sometimes, people are going to be angry or upset with one another. An employee (or former employee) will likely sue or otherwise initiate a formal complaint at some point. Having policies written out beforehand helps: if x happens, then y will be the result; but, that's not always easy in practice in a small business. Example: you have two employees who can operate a machine (only one is needed), and one of them goes out on medical leave and can't return for 6 months; early into this time the working employee makes a racist comment towards another employee, causing significant offense; do you immediately terminate the employee for the comment and fail to deliver to your customer, or do you retain the employee until you can have someone else operating the machine? Either answer can get you sued, successfully (breach of contract vs hostile work environment). There's dozens of no-win scenarios that play out every month, so the goal is always to minimize the damage however you can.

a challenging part of being a business owner is handling conflicts that arise between people (picture: The Independent)

What is the best piece of advice or suggestion you would have for a college student interested in starting their own business in the future?

It's important that you finish your degree. At times, you might not feel like it's worthwhile. You really can't predict the future, though, and having a degree can make a big difference when things go sideways on you. Beyond checking off the requirements for that degree, start to ask questions about yourself and find areas of improvement. You can often take classes that will help. Take a women's studies class. Take a business finance class. Learn to program with Java.

If/when you have a business of your own, you'll often have to decide when to get outside help versus doing things yourself. I'm not a great mechanic, but my mechanic charges $95/hr, and sometimes it's just better to fix something in-house. The more skills you have where you're decent (but not an expert), the better. While in school, you can often pick up these additional skills fairly cheaply via classes or even clubs. You'll never know how many times you'll need to be the "IT guy" or the "plumber" or the "janitor".

having many different skills is always a plus (picture: eLearning Industry)

In Conclusion...

I'm very thankful to have had the opportunity to talk to this business owner about his experiences and how he got there. Some of the biggest takeaways for me were

• one way to start a successful business is for it to address something that is needed in the community, for example in this case his searchlight rental company addressed the need for affordable searchlight rentals.

• businesses can also be acquired through buying them, this could be an investment that yields a lot of profit in the long run, but it must be done wisely.

• all sorts of experiences can help us in things we decide to do in the future, so it is important to do our best with every opportunity that comes our way

• be prepared for unexpected monetary issues that arise in running a business. it is wise to have a supply of money left aside that can be used in emergencies.

• in running a business, try to have established policies and rules that address potential conflicts and disagreements that may occur.

• have a good learning attitude, you never know when you need to use a certain skill, so take advantage of every opportunity you have to learn new skills.

Having conversations with people that are living the lifestyle you want are very valuable and insightful experiences. There are many people that are willing to help, so it's always good to be reaching out to people professionally. I hope this interview was helpful and that you learned something from it!