Is Your Business Functioning Properly?

By Aaron Muller
February 2007

Last month, my business partner Oliver introduced the 6 components of a business. If you want to become an absentee business owner, you will need to know these components inside and out. The 6 components are business fundamentals, marketing, employees, operations, finance, and absentee owner management. Today, I am going to focus on the first component – business fundamentals. I am going to describe how absentee owners think about their business, so you can start thinking about your business the same way absentee owners do.

Absentee owners believe that a business is a cash converting machine. A healthy business should convert a small bag of money into a big bag. It looks something like this:

It’s very simple. You put in a certain amount of money into the machine. The machine will convert your money into a lot more money for you. If your business is working correctly, this is how your business should look like. You put in a small bag of money, and you get out a big bag of money.

Having said that, let’s now look at some malfunctioning businesses.

1. Your business converts the big bag into a small bag.

This is what happens when your business is losing money. For many startup businesses, this is what it looks like for several years before the bag on the right side finally becomes bigger than the one on the left side.

2. Your business converts a big bag into a big bag.

This is what people say when your business “turns a lot of dollars”. It’s true that you generate a lot of revenues, but your expenses are so high that you don’t end up making much profit. Another way of saying it is that even though you get a big bag on the right side, you need to put in a big bag on the left side. Your end result? Your bag on the right might be slightly larger than the one on the left, or about the same size. It’s almost not worth the effort to go through all the hassles of running a business. Many gas station owners run into this problem due to the nature of their industry.

3. Your business converts a small bag into a small bag.

This is the reality for many “mom-and-pop” shops. It’s a small operation that requires a small amount of money, but it also doesn’t generate much money at the end. Many of these owners are hard-working people working 60-80 hours a week. For the amount of effort they put into their business, they deserve to get a lot more.

What does your business look like? Is it converting a small bag of money into a big bag, or does it fall into one of the malfunctioning business categories? If your business is not making you the money you want, chances are it is not converting a small bag of money into a big one. To become a profitable absentee owner, this is the first area you will need to work on.

For more information on how you can become the absentee owner of a profitable business, check out our consulting program.

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