4 Types Of Business Owner

There are 4 types of business owner that I come across regularly in my consulting business.

The model describes the 4 types of business owner well. The axes for the model are high to low Time/Busyness (horizontal) and low to high dollars (vertical).

1. Pretender – low amounts of time for low dollars. These business owners are really a hobbyist pretending to have a business. They need to have another source of income or they will be broke very quickly. This may be possible as part of a start-up strategy while leaving a full-time paying job; however it is not sustainable. The action required for the Pretender is to decide whether they are going to commit to making their business a reality.
2. Persister – long hours for low dollars. It always surprises me how long some ‘business owners’ will operate with very low cash flow. They are valiantly working in their business but something is very wrong. They may have a poor product or service. They may be in the wrong market. They lack a marketing strategy. In my experience, they are usually operating without a clear business plan. The action required for the Persister is to review. They need business advice to help them create an effective business plan that will help them focus their energy to make their business more profitable.
3. Practitioner – long hours for high dollars. These business owners spend large amounts of their time running their business. They enjoy the ‘freedom’ of being their own boss. However, they have no freedom to leave their business, except for relatively short holidays.They tell themselves they are building an asset they will sell one day for their retirement. However, unless they have property, their business is usually worth far less than they hoped at sale time. The action required for the Practitioner is to leverage. They need to find ways to leverage their hard work and the cash flow from their business for wealth creation. Otherwise they will always be working long hours. Most Practitioners pay a huge cost in time away from their family and can struggle with poor health due to ineffective self-care strategies.
4. Rockstar – low amounts of time for high dollars. A very small percentage of business owners manage to become free of the running of their business. This requires a great product or service, great business thinking, a clear business plan, and the leadership skills to build a high performing team. Rockstar business owners have the energy and vision to accomplish a lot quickly. They usually have high level business skills or hire an effective business coach. The action required is to enjoy the fruits of their work.

Some general observations about the 4 types of business owners:

• Pretenders and Persisters are among the 75% of business owners who close their business down within the first 5 years
• The majority of small business owners who gain some level of success are Practitioners. They are a special breed of independent hard working people. Usually quite generous and community minded. However, few become wealthy unless they learn to leverage their business. Many resist the idea of paying for business advice.
• Rockstars are the only group you can guarantee will have an effective business plan which helps them focus their energy and talents.
• Usually Rockstars also have a business coach who helps them plan and implement.

Which type of business owner are you? 

A good friend of mine Jane Anderson has a model on LinkedIn for Lead Generation. My model was inspired by her work as I thought about the challenges business owners have with return on investment on their time.