A Business Whose Only Asset Is the Founder Is a Job

She wanted me to buy her practice.

I liked her, I liked the work, and I did what I’d do with any business someone offers me: I looked for what I’d actually be buying.

The things a buyer actually pays for:

• Clients who come for the practice and not the person.
• A team that treats them.
• A lease someone else could take on.
• Systems that run on a Monday whether or not the owner is in.
• A name people search for.

What was there was her. A full diary, because she’s good. Clients who were loyal to her, not to the sign. The staff comes and goes. The lease was ending. Every dollar the business made walked in because she was in the room.

There was nothing to buy. The kind answer and the true answer were the same, and I gave it: the day you leave, the thing I paid for leaves with you.

A job with a down payment

That’s what a buyer sees when a business is all founder. Not a bad business. A job, with a deposit on the front.

Small service businesses change hands at roughly two to five times the owner’s profit. The spread between two and five is almost entirely how much of the business is you. At the bottom of that range, and below it, sits the business that can’t be separated from its owner. It doesn’t get two times. It gets a polite no.

None of this is a comment on the owner. She’s a better clinician than most people who’ve sold a practice. It’s a comment on what she built: income, not an asset. The income was real.

The asset wasn’t there.

I’ve been that business

A rented room, my name on the door, a diary filling nicely.

Then a landlord played me and I lost it overnight. I’ve told that story before. What I didn’t say is what it was worth at the time: nothing. To anyone but me, nothing. There was no team, no lease worth having, no system. There was a therapist with a bag. When the room went, the business went, because the business was me standing in a room.

The business I sold for seven figures in 2014 came after freelancing through an agency, running one, house calls, and three clinics I lost to landlords and politics. It was the first one I’d built so it could be bought. Different decisions from the first hire. That’s the whole difference between a practice someone offers you for free and a practice someone pays for.

The month-off test

Here’s the test, and you don’t need a buyer to run it. Take a month off. Properly off: no phone, no “just checking”.

What’s still running at the end of it is what you own. The clients who came anyway. The staff who treated them. The invoices that went out. The bookings that came in. That’s the asset.

Everything that stopped is the job.

Most owners never run the test because they already know the answer, and the answer is uncomfortable. Run it anyway, even on paper. Your date depends on it.

What it does to your date

This is the part the FIRE maths gets wrong about owners. A business that needs you doesn’t count toward your number. It pays you, so your savings go up, but the business itself contributes nothing to the pot, because it can’t be sold and it can’t run without you producing the income. For your date, it’s a salary. A good one, maybe. Still a salary.

The moment it runs a month without you, two things change at once.

1. The distributions start to look like income that doesn’t need your hours, which shrinks your number.
2. And for the first time there’s a price, a lump that can land in the pot in one go. I’ve written the whole ladder out; this is the step from Level 3 to Level 5, and it’s the one that moves the date most.

“Nothing to buy” isn’t a verdict. It’s a position on a ladder, and the ladder has a next rung.

The next move

If your business failed the month-off test, the next move isn’t to sell. There’s nothing to sell yet. The next move is the first thing you build that isn’t you: the first hire who treats, the front desk that books without you, the referral source that sends to the practice and not to your phone. One of those. Then the next.

Open the second door on the calculator, put your profit in, and move the “runs without you” dial. Watch the price change. Then watch the date change. That’s what the next rung is worth to you, in years.