Lifestyle Business or Growth Minded Business? By Matt Everatt FOTA - Editor and Senior Partner S4S (UK) Ltd

LIFESTYLE BUSINESS OR GROWTH MINDED BUSINESS?

By Matt Everatt FOTA - Editor and Senior Partner S4S (UK) Ltd

Many Dental Technicians and Dental Labs have classically started out as a small, one person set up in a garage or outbuilding, some have survived their whole career running these 'Lifestyle Businesses' or 'Mom and Pop Shops' as our American cousins refer to them as.

Can you truly run a 'Lifestyle Business' in this very fragmented and often, very competitive arena of Dental Technology? By definition, a Lifestyle Business is focused on earning enough money to fund a reasonable living for the proprietor/owner. Whereas, a Growth Minded Business will focus on developing a business with profits for shareholders being a primary concern and the ultimate aim of exiting the business at a point in the future, hopefully selling at a reasonable value.

WHICH IS THE BEST, A LIFESTYLE OR GROWTH BUSINESS? Well, this is a decision for you to make and one that is best to make from the outset. Whilst a Lifestyle Business may appear less risky and more attractive from the outset, try taking annual leave when your customers still want your services. Or, as we found out this year, try getting some of the benefits dished out by the government when you're a sole trader. No sick leave entitlement, you make your own pension contributions and you have to ride out the busy and quiet periods on your own.

It's not all doom and gloom though. You are your own boss, to a degree, makers of your own destiny, as long as dentists keep sending the work in, you charge a reasonable rate for your work and keep your overheads down, you can make a comfortable living. You have no shareholders to please with dividends and the money you make is yours to do with as you please, once you’ve paid the tax man of course.

THE ROUGH WITH THE SMOOTH You can find you are more sensitive to pricing with a Lifestyle Business. You will tend to have fewer customers and as long as they keep sending the work, life is good. The moment you have a big customer call to say they are trying another lab because they can do it cheaper, you have to make a decision. Be willing to hold your nerve and stand by your prices, or take the hit. Inevitably leading to working harder for less money. If you're lucky, your customers may be extremely loyal throughout your tenure and accept that you close for a couple of weeks during Christmas and summer and they are OK if you have to return cases late because you had an unexpected illness. Those clients are gold dust, I still have a few of those who have followed me wherever I have worked and have become close friends, more so than customers. They accepted my 'higher than most labs pricing, in return for a quality and personal touch they liked and wanted.

A Lifestyle Business is definitely OK and some of us may spend the last few years of our career out by servicing the needs of a few key customers to top up our pensions or make a bit of pin money. Or it may just suit your personality and family situation, these are great reasons to own a Lifestyle Business.

Dental Technicians or Small labs with 1 or 2 owners are plentiful in the UK. They seem to work well for many reasons, the ease of startup and low cost of market entry. Equally, the relationship between technician and dentists can be quite a personal one and lends itself to small Lifestyle Businesses. The personal touch is often something that larger labs have to work harder at maintaining as they grow.

WHAT ARE THE PROS AND CONS OF CREATING A 'GROWTH BUSINESS'? I should start by defining what I mean by a 'Growth Business'. Essentially, I mean a business that is scalable, different to a Lifestyle business in many ways. Firstly, the structure of the business would tend to look different, although you may not start out as a Limited company, it is very likely that once you begin scaling up, you would register the business as a Limited company.

You may have shareholders or fellow directors. Your business will have a mission or vision statement of where you aim to be and what sort of business you hope to run.

If you are looking to start a business with growth in mind, you certainly need to think about your exit strategy. Yes, it seems odd that you begin thinking about exiting the business before you've even started, however this is a genuine consideration. You don't want to spend years of your working life building value into a business if you just let it dwindle away when you retire or feel like winding down. A carefully planned exit strategy will ensure you get the most value out of the business when that time comes.

Exiting a business does not mean you will necessarily sell up 'lock, stock and barrel'. You may retain some shares and become a silent partner, there are many options, we can discuss more on exit strategies in future articles. Safe to say, it is an important consideration, I have seen so many Dental Labs close their doors when the owner retires. It is simply a lifetime of goodwill gone in the blink of an eye.

Growing your business will require a good team of likeminded individuals who share the same vision. A mistake many of us lab owners make is, we think we need duplicates of ourselves. I thought this for many years, ‘If only I could replicate myself’. I soon learned that, if my business had two of me, we would probably have been bankrupt in the early stages and would have bought every gadget under the sun that would be sat gathering dust under a lab bench somewhere.

Having a management team of varying skills and knowledge is key. Ashley Byrne covered lots on Leadership and Management in previous articles last year. If I could recommend a book to read, it would be Simon Sinek’s ‘Start With Why’. The author discusses leadership and organisations, he suggests that when we are running our organisations we should first look at WHY we exist, what is your purpose/cause/ belief? We all know WHAT we do, we run dental labs and make dental devices in varying guises. Some will know HOW we do it, but very few owners/leaders know WHY we do what we do and this is a great start to pulling together your Vision and Mission Statements for your growing business.

The real benefits I see with a Growth Business is longevity and future planning. There is one thing for sure, both business types will no doubt require a lot of leg work from you in the early stages, getting new customers, organising marketing, doing the work and so on. With a Growth Business you will start to build a team of managers that can share the burdens and tasks. They can help with new ideas, be a sounding board too, and very important, you will be able to take annual leave without the constant worry of a client calling needing an urgent case doing or sorting out a disgruntled dentist who is struggling to fit one of your crowns.

FURTHER DOWN THE LINE We are all humans and made of the same stuff, we get older, lots of us have families and life changes many times throughout our working lives. If you create a business that is not reliant upon one individual, you, it is likely that it will be more valuable should you wish to exit or want to invite colleagues to invest in the business. If you are a small 1 or 2 person lab and one of you gets sick, you are going struggle and god forbid the worst happens, your family may be left with no income and the lab has a huge hole that may not be easily filled and clients will migrate to other providers and the business dies with you.

If you have been growth minded and created a valuable business you will have many more options for your future. You may have a family member that takes over your shareholding, you may have external investors interested in buying your business, you may have managers interested in buying into the business. Or you may just retire and have your management team run your business for you as a silent partner.

Whichever path you choose Lifestyle or Growth Business and I understand there are personal reasons why you may choose one path or the other. It is more likely you and your family will benefit from the years you have put into growing the business if you have grown the business with your exit plan in mind and you have grown a management team that can run the place without you in the business.