What is a Business Owner?
A business owner is an individual who owns and operates a business, small or large, with the aim of deriving profit from its successful operation. He or she typically makes all important decisions for the business, whether related to the product/service on offer or its infrastructure, and may work with partners or employees, or be the sole proprietor.
Business owners typically follow established business models, preferring relatively low risk, and aim for moderate growth and profitability. They are contrasted with entrepreneurs, who tend to focus on new and innovative products or services, and run a higher risk with matching high profitability and rapid growth potential.
What Does Business Owner Mean?
The owner can be the same person who directs the business and controls its day-to-day processes or he can choose to have a Manager for that purpose, or even name a Board of Directors to do it. The corporate governance applied in a particular firm largely depends on its size and operational complexity.
In spite of the company’s size, the owner has the ultimate control on its company and therefore decides whether to delegate or not certain key executive functions on qualified professionals. The business owner can earn a monthly wage but he is not an employee.
In contrast, any other person working at the company is an employee no matter his hierarchy within the organizational structure. In addition, the business owner has the right to take the net profit obtained at the end of every fiscal year or reinvest it in the company.
What does a Business Owner do?
The Business Owner plays a strategic role and is not engaged in the day-to-day activities of managing the service. Rather, they focus on the big picture. They define the vision and roadmap. They have the knowledge and authority to make strategic decisions and clear the path of political and financial obstacles. They communicate to key stakeholders and work closely with the Service Owner, who is responsible for developing a roadmap that aligns with the vision.
What are the general responsibilities of a Business Owner?
- Provides high-level business requirements and works closely with the service owner during the design phase. Prior to launch, they validate that the service meets the expected business outcomes.
- Ensures the service aligns with industry direction, standards, and best practices
- Represents the service in business strategy discussions and provides strategic advice to the service team
- Reviews and approves (if acceptable) identified service risks and mitigations
- Controls and prioritizes all business requests, such as those for feature enhancements, ensuring limited resources (both staff and dollars) are spent on high-value requests
- Reviews and approves communications for key stakeholders and the business during “Major” service incidents
- Owns the service roadmap
What does a business owner do?
1. They set the vision and strategy
- A business owner goes into business with an idea, a product, a service, or a big picture in mind. These preliminary ideas serve as the vision and direction of the business.
- Over the years the owner revisits the early vision to analyze if it requires any adjustment concerning internal or external changes.
- The owner communicates the vision to his teams to encourage ownership and work towards achieving common goals.
- He might also involve employees in discussions to set specific objectives to reach common goals. It is better to involve employees to create ownership however this may differ with owners, companies, or industry.
For example, The vision of Facebook is to ‘connect with friends and the world around you on Facebook’, for Teach for America it is ‘One day, al children in this nation with have the opportunity to attain an excellent education and for Microsoft, during its founding, its vision was ‘A computer on every desk and in every home’.
2. They hire, Train and Manage Staff
- Business owners may be required to hire, train, and manage their staff. Some organizations appoint human resource professionals or accountants to handle these activities and related tasks such as taxes, benefits, reporting, and accounting.
- The owner should also know the federal and state laws and regulations affecting their employees or hire professionals to do it for them.
- Staffing management also might require them to train, mentor, and develop the existing staff.
3. They plant and Cultivate the work culture
- Work culture comprises of the beliefs, values, attitudes, and thought processes that contribute to a distinctive social and psychological environment of a business.
- The owners’ core beliefs and values set the standards and influence the work. As employees join the organization, they get influenced by these ideals, embrace, and share it with others in the organization.
- However, owners should also lookout for signs of a toxic work environment which can be counterproductive to the organization’s growth.
For example, Twitter as a company is loved by its employees for its work culture which involves rooftop meetings, open dialogues with management, on-site gym, free food, and others. The culture is built on a casual, friendly, and learning-based environment.
4. They operate the company
- Business owners are responsible for carrying out daily operations. That means putting together a business plan to function as a roadmap.
- If the business is a product manufacturer, the owner must put processes and systems in place, figure out the supply chain, find the right location for business, and so on.
- Over time, they may delegate these responsibilities to select a set of managers and oversee their developments.
5. They sell
- It takes some time before sales become part of the employee’s job description. Till then, the business owner is the one source for selling- he approaches future clients and goes on sales calls.
- The owner might hire staff eventually for this specific purpose but might still be involved in the bigger deals.
- In the early days, he even gets involved in marketing through campaigns, advertisements, or emails.
- It also includes being responsible for customer satisfaction by answering queries on call, manning live chats, or calling for feedback.
For example, In the early days, Airbnb founders were trying to reach out to non-U.S. destinations. They physically visited half of the French cities or towns, talked to few users already in the market, set up information gatherings, threw parties, posted flyers, and set up booths to sell the concept to their clients.
6. They manage finance
- Business owners establish budgets, sales forecasts, profit & loss statements, and keep the accounting system up to date.
- They review sales reports, expenses, sales activities, bank statements, and collect overdue accounts invoices. They also invoice their customers whenever a sale is made.
- Owners are overall responsible for the financial health of the business.
10 Tips to Become a Successful Business Owner
1. Be passionate about what you are doing
Your daily grind should be one of passion and fun. My brother used to say, “If you do what you LOVE… you’ll always be successful at it.”
2. Surround yourself with people that will challenge you, not “yes men”
You need to be able to listen to all sides (pro and con) before you make a decision. Listen to people who give their honest opinion–not those who tell you what they THINK you want to hear. You need to know where the landmines may be before you make a decision. I challenge my people to argue with me, and I really enjoy it. It keeps us all on our toes and makes for some exciting and entertaining staff meetings.
3. Appreciate your people
Your team can make or break you! Many business owners think I spoil my employees. The truth is that without them, we would never be where we are now. As a business owner, I only drive the train, my employees provide the steam to run the engine uphill. To this day, I still look for those diamonds in the rough!
4. Always consider your customer’s point of view
This is valuable for everything from marketing promotions to problem resolution. It’s not that the “customer is always right,” but it is important to put yourself in their shoes and treat them like you would want to be treated if the roles were reversed.
5. Be a value to your suppliers
No matter what industry you’re in, it is important to establish bonds with those you do business with. Ask yourself what you are bringing to the table and remember that you both need each other. TALK to them, get to know them–don’t just email or text them. In a pinch, they can help you.
6. Appreciate your competitors
Seems odd, right? But our competitors keep us on our toes and inspire us to do better every day. Many of them I now consider my friends, and we formed a strong alliance with a common goal to keep industry ethics on track. We typically have the same problems, and there really is strength in numbers!
7. Have an exit strategy
Realize that at some point, you need to either sell your company or pass your business on to a loved one. Create a succession plan within your organization. You need to recognize that when the time comes, you must protect your legacy and maximize your years of hard work. For me, that was two years ago when I sold my controlling interest in CruCon to a $2B company. I then created SLC Group Holdings to invest in and mentor young entrepreneurs and help make all their dreams come true!
8. Build a strong support system
Everyone needs a support system because you will have times when you just don’t see the light. Crap happens. So, you need someone there to pump you back up and give you renewed confidence. I couldn’t have gotten to where I am today without the support and unwavering trust of my SLC Group Holdings staff, as well as the unconditional love of 22 little feet that meet me at the door every night with tails wagging – my four tiny Maltese girls, my cat (Finney), and, of course, my Bruce! It doesn’t matter how bad the day was, they (and a lemon drop martini) make it all better.
9. Pick yourself up when you fall down
Use your support system from number eight! You WILL make mistakes. We all do. Don’t blame someone else for them. Own them. They are yours. Recovering from our mistakes quickly and learning a lesson makes us stronger and wiser in our decisions going forward.
10. Whenever possible, pay it forward
It’s tough when you first start out to donate to charities or volunteer within your community because you don’t have money or time, but once you have some breathing room, it’s an important thing to do. Businesses are the pillars of their communities. Give something back. Your community needs it. It brings you new employees and retains old ones because they are proud of where they work. You never know when you may need their support for something. Plus, it brings good Karma, too!
Types of Business Ownership
In this section, we look at the common types of business ownership
1. Sole proprietorship
- It is the most common form of business ownership in the United States. It is a business owned and operated by a single individual, who is responsible for all the business functions such as accounting, marketing, production, and management.
- The business owner can operate under their name or use a trading name. However sole proprietorship is not considered a legal entity, which means the owner has unlimited liability and is personally liable for all the business debts.
- In case, the business runs into financial trouble or is pressed with a lawsuit by its creditors, the business owner is personally liable for it.
- The income earned by the business is considered income earned by the owner and he is taxed accordingly.
For example, Pierre Omidyar launched eBay as a concept when his girlfriend was trying to sell old Pez dispensers and other collectibles. He realized like his girlfriend there was a huge community of people interested in selling used merchandise but no platform for it.
- The least used form of business in the United States. It is a business that is owned and operated by two or more people. The three common forms of partnerships are general partnership, limited partnership, and limited liability partnership.
- In a general partnership, every partner holds unlimited liability, and every partner is considered as participating in the operations of the business.
- In limited partnership at least one is a general partner taking on unlimited liability and managing the operations. While the limited partner has only liability limited to his financial stake in the business. This partner does not have any direct control over the business or is part of management decisions.
- In a limited liability partnership, multiple partners are responsible for managing the operations however they are not personally responsible for the business debts or actions of other partners. This kind of partnership is restricted to professionals such as lawyers or accountants.
- The benefits of partnership ownership include ease of organization which means that it is easy to form the organization by simply creating the articles of partnership, availability of funding, fewer government regulations, and support by another partner.
- The disadvantages include unlimited liability, partner disagreements, sharing profits, and a limited life span. The partnership is considered ended if a partner dies or withdraws.
For example, HP began as a partnership between Packard and Hewlett in 1939 and was founded as Hewlett-Packard (HP). They had begun work in 1938 in a rented garage with an initial capital of a few hundred dollars. Famously, they tossed a coin to decide whether they will call the company Hewlett-Packard or Packard-Hewlett.
3. Limited Liability Company (LLC)
- An LLC combines aspects of both partnerships and corporations.
- It exits as its legal entity which means the owners have limited liability and are not personally liable for the actions or debts of the business.
- They enjoy the tax benefits of sole proprietorships which implies the LLC is not considered separate from its owner and they are taxed at their tax rates.
- LLC’s are known to be quite flexible and benefits include less paperwork, not required to keep extensive records or hold annual meetings. In many states, they do not even have to file annual reports.
For example, a few years back Google changed from a corporation to a limited liability company.
- It is a legal entity that is created by its shareholders with a common goal and vision.
- The owners are personally not liable for the company’s debts or legal issues. It is the company which is responsible in this case.
- However incorporating isn’t that easy in comparison to other forms of business ownership, as it involves excessive paperwork such as drafting of articles of incorporation, providing information about the number of company shares to be issued, and to whom, the purpose of the business, its name, and location.
- While in other forms of ownership the company is dissolved if an owner dies, withdraws, or declares bankruptcy. Incorporations, they are protected from such situations and continue to exit with other owners.
- The three main types of corporations include C corporation, S corporation, and Non-profit corporation.
- The C corporation is the most utilized form of incorporation where the corporations are taxed as a business unit and owners are taxed individually depending on the profits they receive.
- The S corporation works similarly as C corporations, but they are required to file taxes yearly and are not subjected to double taxation like S corporation owners. However, this form of incorporation is only restricted to U.S. citizens and permanent residents.
- Non-profit Corporations are formed by a charitable organization and are tax-exempt due to their nature of work. However, they are required to their cash flow for the operation of their organization or plans.
For example, Jacks Inc. a globally recognized manufacturer and distributor of the Equine Industry’s finest products is formed as an S corporation in the state of Florida. While Coco cola is a famous C corporation. The American Red Cross is one of the largest nonprofit entities in the United States which provides disaster relief and saves thousands of lives every year.
- A business owner is a person, corporation, or a group who holds legal and exclusive ownership to the assets of a firm and uses it to profits from it.
- The business owner may or may not be engaged with the operations of the business.
- They have a defined job description and perform vital tasks such as defining the vision of the business, developing, or overseeing the business and financial plan, mentoring staff, and communicating with key stakeholders.
- The most common types of business ownership are sole proprietorship, partnerships, limited liability companies, and corporations.