Your Business as a Baby: A Mindset for Multi-Entity Owners (and All Small Businesses)

Managing a small business, especially if you're overseeing multiple entities, can feel like a relentless balancing act. The challenges are immense, and keeping your mental perspective in check is paramount. While this advice particularly resonates with those juggling several ventures, its principles can lead to enormous success for any small business owner.

When you create a small business, you are, in essence, bringing a new life into the world. It’s incredibly common for business owners to view everything their business owns as inherently "theirs." And technically, from an IRS perspective, for sole proprietorships, LLCs, and S-corporations, there's a legal truth to that. However, this mindset, while seemingly harmless, can lead to a host of significant problems: from lackadaisical bookkeeping and blurry financial separation, to the casual "borrowing" of business assets or general mismanagement of funds.

Nurturing Your Business to Independence

It's crucial to shift your perspective and think of this new entity you've birthed into the world as its own distinct being. Just like birthing a child, you're immediately faced with enormous responsibility and an overwhelming workload. In the beginning, you have to do virtually everything for the business and supervise every single aspect. The dream, however, is that as your business grows, it gradually begins to assume some of this responsibility. Its employees start to take care of its daily needs, and your role as an owner gradually evolves to become more top-level and strategic, less about day-to-day operations.

Ideally, your business matures into an entity capable of surviving and thriving independently. Its internal systems and dedicated employees take care of its core needs, allowing you to manage your empire remotely, perhaps even focusing on new ventures. Ultimately, the pinnacle of this journey is when your business is self-sufficient and proactively taking care of your needs, providing a steady return for your years of hard work and sacrifice.

The Pitfalls of "It's All Mine"

To reach that dream, you have to grow the business through its vulnerable early stages. In the beginning, it's incapable of defending or even feeding itself. As the business owner, you'll likely need to source outside funding to keep it going, whether through personal equity injections or external investments. But as your business grows, it starts to acquire assets: vehicles, specialized tools, valuable equipment. It may be incredibly tempting to think of these as simply "yours."

However, let’s consider an analogy: Do you truly consider your child's possessions entirely your own? Legally, yes, you might technically own them as a parent. But is it in your child's best interests for you to "borrow" their cherished toys for your own uses, potentially damaging them, or simply not returning them when needed? No, it hurts your child's development and trust. The same is profoundly true for your business.

This mindset extends to other critical assets like cash. It is incredibly tempting to take cash out of your business as soon as profits appear. Consider your child, working hard mowing neighborhood lawns for money. They earn a tidy sum and, trusting you, hand it over for safekeeping. Would it be right for you, the parent, to "borrow" that money for a personal expense, even with the best intentions of repaying it? What if you didn't repay it before your child wanted to spend it on something important to them, like a new game or a trip? Your child would be disappointed, their trust might be shaken, and their future plans could be jeopardized.

Similarly, taking too much cash out of your business can hurt its ability to thrive. Your business needs its own savings, its own war chest. A good rule of thumb is to aim for at least five times your recurring payroll amount in savings, for instance. An owner taking too much profit too quickly can severely hamper the business's speed, agility, and ability to scale vertically, seize new opportunities, or weather unexpected storms.

Adopting a Corporate Mindset for Small Business Success

To foster optimal business growth, you need to approach your business with the same rigor you would an international corporation overseen by a board of directors. A powerful mental tool here is to consider yourself as distinct entities within your own mind. Think: "John Doe – Business Administrator" needs the company to retain earnings for growth, while "John Doe – Personal" desires a new car. It's perfectly okay, and even encouraged, to separate these roles.

As the operator of a business, if that were your only obligation, you would logically prioritize the company's health, efficiency, and long-term viability. Conversely, if you were strictly the owner of a profitable business with no concern for its long-term health, you might think only of immediate personal gain. Internally, or even by voicing this as the perspective of "two different people," you can gain invaluable mental clarity to make decisions that truly serve the best interests of the company.

Every purchase, no matter how small, needs to be scrutinized for its benefit to the company. Every equity withdrawal needs to be considered in the best interests of the company, not just the immediate desires of the owner.

Now, it's true that there's always a delicate balance between the personal financial needs of the owner and the growth cycle needs of the business. These best practices are geared towards optimal business growth. There's a reason why the largest, most successful corporations are structured and run the way they are: it's because this disciplined, entity-focused approach works. You don't want the owner "pillaging" every dollar of profit, leaving the business unable to handle emergency expenses, quickly add to inventory to adjust to a sudden market shift, or invest in new equipment.