Why Small Business Owners Burn Out

Why Small Business Owners Burn Out

Mike Armour

When I ask people why they are starting a business, most talk in terms of some type of freedom. Freedom to be their own boss. Freedom from financial worry. Freedom to have more control over their schedule. Freedom to pursue their passion or their dreams.

Ironically, business owners who start out seeking freedom often end up enslaved. And to a cruel taskmaster, at that. They become shackled, you see, to their business. It slaps manacles on their ankles and wrists. It works them to exhaustion and whips them without mercy.

Now, perhaps I've overdrawn the slavery analogy. Yet I've talked to scores of small business owners, years into their ownership, who describe their situation in terms just this stark. At some point their business came to be dominated more by drudgery than by dreams. They persevere in their daily roles out of duty and necessity rather than passion and excitement.

Starting a Business? Or Just Changing Jobs?

What went wrong? How could one of the most creative enterprises on earth (building a business) become so dreary and disheartening?

Well, at the risk of oversimplification, the answer usually boils down to one issue. Namely, they didn't really start a new business. They just changed jobs. In effect they went from working for one boss to working for another, in this case their business.

When they started their business, to be sure, they told themselves that they wanted to be an entrepreneur. But the way they went about launching and building the business was not entrepreneurial at all. It was more reflective of an "employee mindset."

Their non-entrepreneurial approach is evident in the way that they use their time. Their work is structured so that there is a one-to-one relationship between the number of hours they put in and the compensation that they make. Their daily routine revolves around exchanging time for money, which is what employees do.

Entrepreneurial Mindsets

Entrepreneurs have an altogether different agenda. Exchanging time for money is nowhere on their radar screen. Entrepreneurs exchange ideas for money. They begin a company to give wings to an idea.

It's not that entrepreneurs are unconcerned about making a living. They have to feed a family and pay their mortgage, just like everyone else.

For entrepreneurs, however, money is a by-product of their business, not the end-design of it. They believe that great financial reward awaits if they simply find creative ways to harness commercial and economic power to their ideas.

And therein lies a critical difference in the way that entrepreneurs start a business. From day one the entrepreneur approaches a new business by looking for leverage points. Entrepreneurs know that the secret of harnessing power to their ideas is leverage.

And notice the word that I've used. I've described them as pursuing leverage, not efficiency. Leverage and efficiency both have the purpose of producing greater output from the same input. But there is a fundamental difference between leverage and efficiency. To illustrate, let me cite just two examples.

Leverage and Efficiency

If you use your available capital more efficiently, you don't increase the amount of money that you have to work with. You merely get more things done with your available funds.

If you rely on financial leverage, by contrast, you actually enlarge the amount of capital at your disposal. And you do so without requiring additional investment from your personal resources. This is why financial leverage is often called "using other peoples' money."

A similar principle holds with time. If you work more efficiently, you don't increase the amount of time you have. You simply get more done in the same amount of time. But when you leverage your time (through smart hiring, effective delegation, appropriate outsourcing, etc.) you significantly increase the amount of time and energy that is devoted to your goals.

Leverage, then, has a multiplying effect that efficiency does not. And here's my point. The way that employees seek greater productivity is by improving efficiency. The way that entrepreneurs seek greater productivity is through increased leverage.

Not that entrepreneurs are indifferent to efficiency. Far from it. For them, however, the purpose of efficiency is to free up more time for them to create leverage. Leverage is how they harness power to their ideas.

The Limitations of the Employee Mindset

Contrast this to people who think like an employee. For them the purpose of efficiency is to give them more time to do more things.

As a result, I can quickly determine whether a business owner has an employee mindset or an entrepreneurial mindset. I only have to ask this one question: Do you put your greatest energy and creativity into improving your efficiency or to increasing your leverage?

In short, being a business owner does not automatically make you an entrepreneur. You can own a successful business, yet still think like an employee.

Isn't it interesting, indeed, how we refer to people who own small businesses? We frequently describe them as "self-employed." Our very language thus implies that, business owner or not, they are still employees. They are still job holders.

That's poisonous. If you think of yourself as "self-employed," you're limiting the opportunity for your entrepreneurial spirit to shine forth. You can't think like an employee and think like an entrepreneur at one and the same time. They are entirely different mindsets.

Burning the Proverbial Candle at Both Ends

Which then takes us back to those burned-out business owners we met in our opening. Why their burnout? Because ownership taught them that a small business never diminishes its demands on you. The demands increase steadily and inexorably.

At first you may be able to stay abreast of these demands by upping your efficiency. But there comes a point, perhaps several years into the game, at which the growth in demands outstrips any potential gains in efficiency.

Gradually, almost unnoticeably at first, you begin putting in longer days and more days. First you start sacrificing weekends. Then you start eating into vacation time. Soon you are burning the candle at both ends and in the middle, too.

Creating Leverage

Fortunately, there is an escape. It's never too late to start capturing the power of leverage. Here are some steps to take.

  1. Never again refer to yourself as "self-employed." You may have to check the "self-employed" box on an occasional government form or loan application. But otherwise avoid it. Adopt an entrepreneurial mindset.
  2. If you have employees, ask yourself if they are the right ones. And by "right ones" I mean people whose abilities, attitudes, and initiative free you up and leverage your time. If not, start a measured process of replacing any or all of your employees with people who serve your needs better.
  3. If family members are part of your business, don't exempt them from the "right employee" test. Letting a family member go is highly consequential, I know. (That's why I normally counsel small business owners to forego hiring from within their immediate or extended family.) Yet sometimes it's a choice you must make. Some of the most exhausted and frustrated business owners I know are people trying to build a business around family members who do not carry their own weight.
  4. Continue to look for ways to outsource. Today almost every essential function for administering a business can be quickly outsourced to competent, trustworthy people. Yes, setting up outsourcing arrangements does require an investment of time. But the return on this investment comes with amazing speed. And it repays the investment many times over.
  5. Systemize your business and management processes so that they run on auto-pilot. Minimize the number of places you need hands-on involvement. This is one place where outsourcing can serve you well. Start by systemizing your most vital or time-consuming processes first. Then move on to others.

Success always starts with a mindset. And for small business success, that mindset is entrepreneurial.

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